Date: 26 September 2024
Broker Name: UOB Kay Hian
Insurance Registrations and Sales Performance
In the 38th week of 2024 (16-22 September), XPeng recorded 3,500 insurance registrations, reflecting a 25% month-on-month (mom) increase but a 3% year-on-year (yoy) decline and a 17% week-on-week (wow) drop. This brings XPeng’s cumulative insurance registrations for the first 38 weeks of 2024 to 82,000 units. Despite the month-on-month improvement, the company faces challenges in maintaining consistent year-over-year growth.
Competitive Market Positioning
XPeng is increasingly positioning itself to compete in the more affordable, mass-market segment of the electric vehicle (EV) market. This shift down the price curve puts XPeng in direct competition with established players like BYD and emerging competitors such as Geely. While XPeng aims to penetrate a broader consumer base with competitively priced models like the Mona M03, it faces stiff competition in terms of pricing and innovation.
Sales Targets and Financial Outlook
XPeng has set an ambitious target of delivering 280,000 units by the end of 2024. However, the broker estimates that actual deliveries for 2024 will likely total around 200,000 units, casting doubt on the company’s ability to meet its target. The company is projected to continue operating at a loss, with estimated net losses of RMB7.80 billion, RMB6.13 billion, and RMB5.22 billion for 2024, 2025, and 2026, respectively. Despite the expected sales contribution from the Mona model, the sustained losses and significant cash outflows remain a concern.
Competitive Pressure in the EV Market
XPeng’s move to focus on lower-priced vehicles like the Mona M03 has resulted in a lower gross margin compared to its overall profitability. This strategy, while increasing its market presence in the competitive mass-market EV segment, also means XPeng is under pressure to maintain cost efficiency and improve margins. The company is challenged by competitors like BYD, which holds a strong position in the mass-market segment, and Geely, which continues to roll out new models.
Long-Term Profitability Concerns
The broker maintains a pessimistic outlook for XPeng’s profitability over the next few years. XPeng is expected to remain in a loss-making position through 2026, with the company’s cash outflows and operating losses continuing to weigh heavily on its financial performance. Despite its efforts to increase sales and market share, XPeng’s ability to achieve long-term profitability remains uncertain.
Conclusion
While XPeng is making strides in insurance registrations and remains focused on expanding its market share, the company faces significant challenges in achieving profitability. Its aggressive move into the mass-market EV segment has come at the cost of lower margins and ongoing financial losses. The broker maintains a cautious outlook for XPeng, emphasizing the need for the company to address its sustained losses and improve cash flow management in the coming years.
