XPeng Posts Wider Q1 Loss But Signals Volume Rebound on SUV Pipeline
XPeng reported widening first-quarter losses as seasonal headwinds and model transition friction weighed on deliveries, though management's aggressive second-quarter guidance—fueled by four new SUV launches—prompted a 4% premarket rally in U.S. shares on May 28.
The Guangzhou-based electric vehicle maker delivered 62,682 units in the three months through March, down 33.3% year-over-year, while revenue declined 17.6% to RMB 13.03 billion (US1.81billion). Net loss widened toRMB1.78billion(US247 million) from RMB 660 million a year earlier, as R&D spending surged 46.8% to RMB 2.91 billion to fund AI initiatives including robotaxis and humanoid robots.
Yet gross margin—a critical profitability gauge—rose to 20.6% from 15.6% a year ago, beating the 20% analyst consensus compiled by Bloomberg. Vehicle margin improved to 12.1%, up 1.6 percentage points annually, despite sequential pressure from higher chip and battery costs.
"We are on the cusp of a strong sales growth curve," CEO He Xiaopeng said on the earnings call, pointing to the May 20 launch of the GX flagship SUV and three additional models scheduled through year-end.
Q2 Guidance Signals 60%-Plus Sequential Jump
For the current quarter, XPeng projects deliveries of 100,000 to 106,000 vehicles—a 60% to 69% sequential increase—exceeding the 96,923-unit Bloomberg consensus. Revenue is forecast at RMB 19.6 billion to RMB 20.8 billion, implying 7% to 14% annual growth after three consecutive quarters of contraction.
The guidance hinges on execution of an ambitious product cadence: the GX crossover (launched May 20), the L03 mass-market SUV (slated for July), the L05 mid-size model, and one unnamed vehicle. All four are engineered as "global products" for simultaneous China and international launches, management emphasized.
Morgan Stanley analyst Tim Hsiao, who maintains an Overweight rating with a HK$96 price target, called the GX order momentum "surprisingly strong" but cautioned that "further upside hinges on the L03 crossover SUV scheduled for July launch."
Services Revenue Surges as Vehicle Sales Sag
While automotive revenue fell 23.5% to RMB 11.0 billion, services and other income jumped 41.2% to RMB 2.03 billion—accounting for 15.6% of total revenue versus 9.1% a year earlier. The category includes technology licensing fees from partners leveraging XPeng's autonomous driving stack, plus parts sales tied to the growing installed base.
Services margin reached 66.5%, more than five times the vehicle margin, underscoring the strategic value of software monetization. However, fourth-quarter services revenue of RMB 3.18 billion included one-time milestone payments, making the sequential decline expected rather than alarming.
Cost Pressures Mount Despite Margin Gains
Gross margin's annual improvement reflected supply chain optimization, in-house development of electronic architecture and powertrains, and a higher mix of premium trims. But the 0.9-percentage-point sequential decline signaled emerging headwinds: unit costs rose due to storage chip and battery price inflation, according to management.
On the May 28 call, executives said second-quarter vehicle margin would remain "broadly stable" as product mix improvements offset input cost pressures. Full-year gross margin is expected to cap out in the high-teens range, pressured by a heavier weighting toward hardware sales versus high-margin services.
Operating expenses told a mixed story. R&D surged to RMB 2.91 billion, driven by development costs for the four new SUVs and AI projects including robotaxi trials and humanoid prototypes—both targeted for commercial deployment in 2026. Selling, general and administrative expenses declined 3.2% to RMB 1.88 billion as lower franchise commissions offset higher marketing spend.
Overseas Push Targets 50% of Sales Within Five Years
International expansion remains central to long-term strategy. Management projects overseas monthly sales will exceed 10,000 units in the fourth quarter—more than doubling full-year 2025 levels—with Europe showing "particularly strong order momentum" constrained only by production capacity.
Within five years, XPeng targets international markets to contribute approximately 50% of unit sales and more than half of revenue and profit, a dramatic shift from today's China-centric mix. The company held RMB 42.09 billion (US$5.85 billion) in cash and equivalents as of March 31, down from RMB 47.66 billion at year-end but sufficient to fund the product blitz.
Execution Risks Loom Over Turnaround Thesis
The recovery narrative faces meaningful tests. The July launch of the L03—positioned in the hyper-competitive sub-RMB 200,000 (US$27,800) segment dominated by BYD and Geely—will determine whether XPeng can gain mass-market traction beyond its tech-savvy early adopter base.
Morgan Stanley's Hsiao noted that "valuation upside hinges on robotaxis/humanoids," reflecting the market's view that hardware alone may not justify the stock's enterprise value of RMB 77.9 billion. The firm applies a 30%/50%/20% weighting to bull/base/bear scenarios, with the bull case predicated on successful commercialization of autonomous mobility services.
XPeng shares closed at HK66.35onMay28,down4066.35 on May 28, down 40% from their 52-week high of HK66.35onMay28,down40110.80, as investors weighed first-quarter underperformance against second-half promises. The company reaffirmed its full-year R&D budget of RMB 12 billion, split between RMB 5 billion for vehicles and RMB 7 billion for AI and emerging businesses.
Key risks include sustained margin compression from China's EV price war, slower-than-expected overseas adoption due to tariff or regulatory barriers, and execution delays on the compressed launch timeline. April deliveries of 31,011 units—up from the first-quarter trough—offered early evidence of demand recovery, but investors await proof that product velocity can translate into sustained profitability.
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