Chinese pure-play electric vehicle maker XPeng (XPEV) reported a steep drop in sales in the first quarter, likely the result of increased competition in the tight Chinese EV market and an uneven recovery in China following its lifting of COVID-19 protocols.
For the quarter, XPeng reported revenue of RMB 4.03 billion ($590 million), a 45.9% drop compared to a year ago, and a 21.5% decrease sequentially compared to Q4. On the earnings side, XPeng said it had a net loss of RMB 2.34 billion ($340 million) for the first quarter, compared to a loss of RMB 1.70 billion last year, and though slightly narrower than the RMB 2.36 billion loss XPeng reported in Q4.
The Guangzhou-based company also reported total deliveries for the quarter were 18,230, a steep 47.3% drop from the 34,561 cars delivered a year ago, and a 17.9% decrease from the 22,204 reported in Q4.
Looking ahead to Q2, XPeng said it expects deliveries to be between 21,000 and 22,000 units, which would be a decrease of approximately 36.1% to 39.0% compared to a year ago.
The weakness in XPeng deliveries follows steep price cuts from rival Tesla in the quarter, which then led to XPeng and other Chinese automakers cutting prices as well.
“During the first quarter of 2023, I took actions to make changes to our strategy, organizational structure and senior management team decisively. I am fully confident in taking our Company into a virtuous cycle driving product sales growth, team morale, customer satisfaction and brand reputation over the next few quarters,” XPeng Chairman and CEO He Xiaopeng said in a statement.
Earlier this month, XPeng said its new P7i sports sedan continues to gather “strong order intake momentum” and that it intends to significantly ramp up production and accelerate deliveries of the P7i in the near future. XPeng launched the P7i in March 2023 with the hope that the new vehicle will jump-start deliveries.
The P7i is a face-lifted version of XPeng’s P7, which is a direct competitor of Tesla’s Model 3. XPeng also debuted its newest model, the G6 SUV, at the Shanghai Auto Show in April. XPeng says the official launch of the G6 is planned for the end of Q2, with deliveries beginning immediately after launch.
“Going forward, our top priority remains to accelerate growth in sales and market share,” XPeng vice chairman and co-president Brian Gu said in a statement. “As the upcoming G6 launch and other new product launches fuel rapid sales growth, we expect our cash flow from operations to improve significantly.”
Citi investment research analyst Jeff Chung was less sanguine on the near-term prospects for XPeng given its sales outlook.
“We recognize that volume outlook is the key to survival for any automaker depending on sales-volume ramp-up in the near term,” Chung wrote in a note to clients. “The sales guidance of 21-22k units for 2Q23E is generally a miss given consensus expects a sequential MoM EV retail sales recovery at sector level for May/Jun/Jul versus Xpeng’s likely flattish MoM for May and Jun.”
Nasdaq-listed shares of XPeng are down over 11% in early trading on Wednesday.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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