On the evening of May 21st, following the release of first-quarter results that significantly exceeded expectations, XPeng Motors (XPEV.US) on the US stock market saw a sharp surge at the opening, with an increase of over 26%. Although the gains narrowed subsequently, the stock still closed with a 5.92% rise.

On May 22nd, XPeng Motors-W (09868.HK) on the Hong Kong stock market also demonstrated strong performance, with a peak increase of nearly 15% during the trading session. As of the time of writing, the stock had risen by 12.89%.

In terms of news, XPeng Motors released its financial report for the first quarter of 2024 after the Hong Kong stock market closed and before the US stock market opened on May 21st. In contrast to the significant drop experienced by Li Auto on May 20th, XPeng Motors' overall revenue and gross margin were both better than market expectations.

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Revenue exceeded expectations, but sales remained sluggish

Looking at the details, in the first quarter, XPeng's total revenue was 6.55 billion yuan (same unit for all figures below), which was better than the market's estimated 6.11 billion yuan, representing a substantial year-over-year increase of 62.3%, but a significant sequential decrease of 49.8%.

The financial report indicates that the year-on-year increase in XPeng's revenue was mainly due to the increased delivery volume in the first quarter (especially the X9 model), while the sequential decrease was primarily due to the reduced delivery volume of the G6 and the 2024 model G9, compounded by seasonal effects, partially offset by the delivery volume of the X9.

Currently, XPeng's lineup includes models such as the X9, G6, G9, and P7i. However, it is well-known that XPeng Motors has not been selling well since the beginning of 2024, with four consecutive months of sales below 10,000 units. The total delivery volume for the first quarter was only 21,821 units, a year-over-year increase of 19.7%, but a sequential drop of over 60%, which is less than one-third of Li Auto's sales.

Such performance has caused XPeng Motors to lose its luster in the new force sales ranking. As shown in the chart above, since 2024, XPeng's delivery volume has consistently been "far behind" its peers, ranking "at the bottom."

In an attempt to reverse the downturn, XPeng has participated in almost every price war in the automotive industry this year. In early March, the entire G6 series saw a direct price reduction of 20,000 yuan; the new G9 model offered a 10,000 yuan discount; and the P7i Performance Edition with the Pengyi option experienced a price cut of 50,000 yuan.Unfortunately, constrained by seasonal fluctuations, market demand appears relatively sluggish, and coupled with the increasingly fierce "price war," Xiaopeng's price reduction this time has not caused much of a stir.

The weak sales performance has been fully reflected in the secondary market. As of May 21, Xiaopeng Motors (09868.HK) has seen a cumulative decline of 45.94% in its Hong Kong stock for the year; Xiaopeng Motors (XPEV.US) has also lost 40% in the U.S. stock market.

Significant improvement in gross margin, Xiaopeng is really making money with technology this time!

Returning to the financial report issue, despite the poor vehicle delivery, did Xiaopeng's financial situation suffer a severe loss in the first quarter? The answer is no.

The financial report shows that in the first quarter of this year, Xiaopeng's net loss attributable to the parent company was 1.37 billion yuan, with a significant reduction in losses of 41.5% year-on-year, and a slight increase in losses of 1.5% quarter-on-quarter.

What's more surprising is that Xiaopeng Motors' gross margin has increased by 11.2 percentage points year-on-year to 12.9%, and also increased by 6.7 percentage points quarter-on-quarter. Among them, the vehicle gross margin is 5.5%, compared to -2.5% in the same period last year, and 4.1% in the fourth quarter of 2023. The gross margin can be said to be one of the biggest highlights of this quarterly report.

Data shows that in the first quarter's sales composition, the high-end model Xiaopeng X9 (priced between 359,800 and 419,800) has delivered a cumulative total of 7,872 units, accounting for more than 36% of the total sales, becoming the model with the largest single proportion for Xiaopeng. Xiaopeng's average unit price has also reached 254,100 yuan, which is 50,800 yuan higher than the previous quarter.

In summary, the better-than-expected gross margin performance is partly because the effect of the price reduction of Xiaopeng's main models in March was not significant, and the impact on the first quarter's gross margin was limited; on the other hand, it is also due to the improvement in the sales structure of the models, indicating that Xiaopeng has achieved certain results in product advancement through the X9 car price.

In addition to the above factors, Xiaopeng's overall gross margin in the first quarter can be significantly improved, and its in-depth cooperation with Volkswagen in platform and software technology is also indispensable.

The financial report shows that in the first quarter, Xiaopeng Motors' service and other income was about 1 billion yuan, a significant increase of 93.1% year-on-year, and an increase of 22.1% quarter-on-quarter. The increase in this income is mainly due to the revenue from technical research and development services related to the platform and software strategic technology cooperation with Volkswagen, and because this profit earned by "technology" is naturally higher.In February of this year, Xiaopeng entered into a strategic technology cooperation agreement with Volkswagen for platform and software joint development, mainly involving supply chain and joint procurement cost reduction; in April, the two parties will develop a new car based on the latest electronic and electrical architecture of Xiaopeng's vehicles.

He Xiaopeng stated that through strategic cooperation with the Volkswagen Group, Xiaopeng has taken the lead in exporting and empowering its self-developed intelligent technologies, which will bring greater market influence and better financial returns.

Looking ahead, Xiaopeng expects to deliver between 29,000 and 32,000 vehicles in the second quarter, representing a year-on-year increase of 25% to 37.9%; the total revenue is expected to be between 7.5 billion yuan and 8.3 billion yuan, with a year-on-year increase of 48.1% to 63.9%.

During the earnings call, He Xiaopeng, Chairman of Xiaopeng, pointed out that a brand-new Class B pure electric sedan will be launched in the fourth quarter. This model is based on its latest technology and is the first model to reduce costs on a large scale, which is expected to become a popular model in the Class B pure electric market in the second half of the year.

He Xiaopeng anticipates that the contribution of this new Class B model, along with the MONA model, will lead to a significant year-on-year increase in monthly deliveries for the company in the fourth quarter.