Xiaopeng phone call transcript: The rapid sinking of the channel opens the ceiling for delivery

Highlights:

New orders picked up rapidly at the end of February and the first half of March, approaching the peak season level in December last year;

2. Xiaopeng has high expectations for the sales target of G9, and we believe that the sales of G9 can reach the order of P7 in the short term;

3, the supply of lithium iron phosphate is improving, in the second half of this year and next year the shortage of the entire supply chain can be alleviated to a certain extent;

4. In 2021, Xiaopeng's strategic layout channels will sink and attach importance to sales in non-first-tier cities.

Xiaopeng Motors (XPEV. N) On March 28, Beijing time, The Long Bridge Hong Kong Stock Market released the fourth quarter of 2021 financial report after the market and the US stock market, and the Long Bridge Dolphin Jun made an interpretation for the first time, referring to the "The more it sells the more & the more it sells, the more it loses, is Xiaopeng embarrassed or a cow?" The following is the content of this earnings call, which involves expectations for new models & orders, supply chain, profitability, etc., as detailed below:

First, new models & orders

New orders picked up quickly in late February and the first half of March, close to the peak season levels of last December.

P7: More than 60,000 units will be delivered in 2021, ranking in the top three in the B-segment car market. One of our goals for 2022 is to hit the target of more than 10,000 P7 deliveries in a single month.

P5: P5 sales are expected to rise steadily, and we believe that the monthly sales of P5 will be close to the monthly sales of P7 in the second half of this year.

In 2023, Xiaopeng Motors will launch two new model platforms and their first models, namely the C-Class platform and the B-Class platform.

Q: In the case of chip shortage, how much can we sell and produce in the worst case? Is there a sales target for the new G9? What is the gross margin for G9 and P7? If the P9 has a higher gross margin, should the chip be supplied to the P9, can the P7's sales be maintained in this case?

A: We have high expectations for the G9 to have a sales target, and we believe that the sales of the G9 can reach the order of P7 in the short term.

As for whether the G9 and P7 can use the supply chain interchangeably, we believe that the supply chain problem will be alleviated when the G9 starts batch delivery, that is, in the second half of the year or Q4. Both the G9 and P7 are our high margin products and we will guarantee that there are enough chips to produce.

Q: After our research, we found that after the Xiaopeng markup, the order surge, the dealer's waiting period takes 16-20 months, is this correct?

A: Our supply chain has been affected by the epidemic, especially in Shanghai, where key suppliers are located. But we're also strengthening our battery supply chain. We will try to shorten the speed of supply, and the situation will be better than expected.

Second, the supply chain

Q: Regarding the supply of batteries, we currently have 3 battery suppliers, and in the past three months, the supply of lithium iron phosphate batteries has encountered some bottlenecks and delayed the delivery of some cars. What would be the capacity pre-capacity for the three plants?

A: Now that the supply of lithium iron phosphate is improving, the shortage of the entire supply chain in the second half of this year and next year can be alleviated to a certain extent.

We distinguish between the two concepts of planned capacity and actually executed capacity. We are trying to coordinate different production plans, i.e. to produce different models in different factories. We can't yet announce the exact number of capacity for each single plant, presumably estimating that a single plant will have more than 500,000 capacity.

Third, the gross profit margin

We are confident of structural improvements to the gross margin of new models, including the G9, with the medium to long-term goal of increasing our overall gross margin level to more than 25%.

Q: Can we tell us how the company decided to increase the price of existing products by 10,000 to 20,000 yuan or 5% to 9%? What are the changes in the prices of batteries, raw materials and chips? Does the price increase cover exactly this part of the cost increase or does it include expectations for this year's supply chain price increase?

A: We raised the price of existing products by 10,000 to 20,000 on March 20 due to the expected increase in the cost of components, especially batteries. We have not yet negotiated the price of the battery with the supplier, but we expect the price of the battery to rise based on the price of the component. Our price increase covers the increase in potential component costs.

Q: In what ways does the multi-vendor model have a positive effect on us? What is our gross margin expectation for the current situation of rising costs and price increases? Will there be a drop in rates?

A: Multi-vendor allows us to achieve better control over supply and cost.

I do not provide guidance on future profit margins. We actually used most of our battery inventory in Q1, so the increase in battery costs didn't have a real impact on our quarter, and we expect good news on batteries. For the second half of the year, because of the price increase, after the delivery of the protection order, we may be able to cover the cost from the end of May or June. Overall, we expect the profit margins for Q1 and Q2 in 2022 to be comparable to or even slightly better than Q4 in 2021. At the same time, we will sell the G9 in the second half of the year. So we expect the profit margin in the second half of the year to be better than in the first half of the year.

Fourth, the cost side

Sales network: Xiaopeng's sales and service network continues to expand, and by the end of 2021, Xiaopeng will open a total of 357 physical stores in 129 cities, including 209 direct stores and 148 authorized stores. At the same time, in 2021, Xiaopeng's strategic layout channels will sink and attach importance to sales in non-first-tier cities. As a result, our Xiaopeng stores in non-first-tier cities account for nearly 80% of all physical stores, most of which will be realized in the second half of 2021. At the same time, the monthly sales of single stores in 2021 have made significant progress.

Fifth, intelligent

XPILOT 3.0: For P7 and P5 models delivered in the fourth quarter, the XPILOT 3.0 software installation rate is close to 20%.

XPILOT 3.5: City NGP development for XPILOT 3.5, mainly deployed on P5, is well underway, and its beta version is in the process of rapid iteration, with continuous improvements in terms of security and user experience. We also plan to complete the development of City NGP in Q2 this year and plan to launch it in the first cities after approval by the relevant authorities.

In the mass-produced P5, the number of driver interventions per 100 kilometers of City NGP is close to that of highway NGP, and its overall user experience level can be compared with the top domestic all-driverless taxi companies.

XPILOT 4.0: XPILOT 4.0 is planned for 2023 to provide an advanced assisted driving experience that spans all scenarios of highways and urban roads. It is expected that in 2023, there will be at least 4 models, including new and existing models, supporting XPILOT 4.0.

Q: When will Xiaopeng increase the loading rate of XPILOT? Will the loading rate reach 50% in the next 1-2 years?

A: The load rate for XPILOT 3.0 depends entirely on the supply chain of the chip. Therefore, when the chip supply returns to normal, we believe that the loading rate will also increase. In fact, I believe more in our XPILOT4.0 load rate, we expect XPILOT4.0 to be more than 50% load rate.

Q: I would like to know about the driverless technology mentioned earlier and the driverless taxi company?

A: We plan to test this technology on the G9 at Q4 this year, and in fact we plan to complete the transition to driverless cars in 2026. We are optimistic about the future of autonomous driving, and we expect to actually achieve autonomous driving sooner than expected.

6. Others

Factory & Capacity: We completed the technical upgrade of the Zhaoqing plant during the scheduled downtime during the Spring Festival holiday.

Q: I would like to know how much investment is made in the two factories in Wuhan, Guangzhou?

A: The total expenditure of the Guangzhou factory is 2.5-3 billion yuan, and the government provides loans without interest. On the facility side, the government has funded 50% interest, and we will pay the remaining 50% interest. The actual total expenditure of the Wuhan factory is slightly more than 4 billion yuan, of which the interest of 3 billion part will be paid by the government government, and we cover the rest.

Supercharging network: As of January 17, 2022, the number of Supercharging stations under the Xiaopeng brand has increased to 813, covering 337 cities across the country.

Exports: In February 2022, we announced a partnership with top distributors in Europe and the first branded retail experience store for our cars in Stockholm, Sweden. We plan to adopt a similar licensing plus direct sales model in Europe and China.