With a net loss of more than 10 billion, how does Xiaopeng Motors break the game?

Reporter Chen Jingbin reports from Guangzhou

Recently, Xpeng Motors released its financial report for the fourth quarter and full year of 2023, showing that the company's revenue in the fourth quarter reached 13.05 billion yuan, a significant increase of 154% year-on-year, a net loss of 1.348 billion yuan, a year-on-year decrease of 42.9%, and a gross profit margin increased to 4.1%.

However, for the full year, although Xpeng's revenue increased by 14.2% to 30.68 billion yuan, its net loss widened to 10.38 billion yuan, an increase of 13.6% from 2022, and the gross profit margin for the year was -1.6%.

The reporter of "China Business Daily" learned from an interview with Xiaopeng Motors that Xiaopeng Motors improved its gross profit to 6.2% in the fourth quarter through platform-based R&D and technology cost reduction, and its net loss narrowed quarter-on-quarter. The company plans to further improve gross profit margin through scale effect and supply chain optimization in the future.

He Xiaopeng, director and CEO of Xpeng Motors, said that Xpeng Motors' deliveries in 2023 will increase quarter by quarter, exceeding 60,000 units in the fourth quarter, and plans to launch more than 10 new models in the next three years, focusing on the popularization of high-level autonomous driving technology and expanding the global market.

Despite this, Xpeng Motors' sales in 2023 failed to reach its target of 200,000 units, and only 70% of it was completed. In addition, sales of the main model Xpeng P7 have declined significantly in January and February 2024, and sales of the new Xpeng G6 have also declined. The highest-selling Xpeng X9 sold 1,448 units in the same period, while the sales of the P5, G3, and G9 were also not ideal.

The net loss widened to 10.38 billion yuan

In 2023, Xpeng's financial position has experienced ups and downs, especially in the fourth quarter, where there are some signs of improvement, but overall it is still under pressure.

This year, Xpeng's gross profit margin has gone from negative to positive, reaching 4.1% in the fourth quarter, a significant increase from -6.1% in the third quarter. However, for the full year, Xpeng's automotive gross profit margin was -1.6%, showing a significant downward trend compared to 9.4% in 2022.

Xpeng Motors also made decisive "changes" in this year to increase sales and improve its financial position.

In order to hit the sales at the end of the year, Xpeng Motors implemented discounts and preferential policies for its models. These measures, together with the adjustment of the sales structure, such as the increase in the proportion of sales of the Xpeng G9 with a higher unit price, and the reduction of the cost per vehicle, have contributed to the improvement of gross profit margin. In particular, the Xpeng G9 accounted for 26% of sales in the fourth quarter, up from 7% in the third quarter, a change that had a positive impact on the overall sales structure.

In terms of cost control, Xpeng Motors has also achieved certain results. In the fourth quarter of 2023, the cost of a single vehicle decreased by 11,000 yuan quarter-on-quarter to 191,000 yuan. This reduction is due to the implementation of technical cost reduction and the continuous decline in lithium carbonate prices, so that the natural cost of vehicles has been effectively controlled.

The adjustment of Xpeng's organizational structure and optimization of business strategy are also important factors in the improvement of its financial position. Since October 2022, Xpeng Motors has made a series of adjustments, including streamlining SKUs, optimizing sales theaters, merging inefficient stores and procurement strategies, etc. In particular, after Wang Fengying joined the company as president, these measures have been further strengthened.

In terms of human resources, Xpeng Motors has also been optimized. In 2023, the total number of employees will be reduced from 15,829 to 13,550, and the number of R&D personnel will also be reduced from 6,313 to 5,401. At the same time, the growth of R&D spending was also contained, increasing by only 1.2%.

Although Xpeng has taken a number of steps to improve its financial position, it still faces certain challenges.

In the fourth quarter of 2023, the company's net loss was 1.35 billion yuan, although it decreased from 2.36 billion yuan in the same period last year and 3.89 billion yuan in the previous quarter, but it was still in the red overall. The net loss for the year was $10.38 billion, widening from $9.14 billion in 2022.

In terms of sales, Xpeng Motors also failed to achieve its set targets. In 2023, the company originally planned to deliver 200,000 vehicles, but only 70% of them were actually completed. In terms of models, the sales of the Xpeng P7 and G6 have declined significantly at the beginning of 2024, while the sales of the new model Xpeng X9 are relatively good, but overall, the performance of Xpeng Motors in the market still needs to be further improved.

In addition, at the beginning of January this year, the retail sales of Xpeng P7 in February were only 836 units, and there has been a month-on-month decline in January, and Xpeng G6 has also seen a considerable month-on-month decline from the first month, with sales of only 1,161 units in February. The highest sales volume is the new model Xpeng X9, with sales of 1,448 units in the same period, and the remaining Xpeng P5 is 213 units, the G3 is as low as 26 units, and the sales of the G9 are acceptable, but it is only 861 units.

In an interview with reporters, Zhan Junhao, founder of Fujian Great Aim Brand Positioning Consulting, analyzed the multiple reasons why the sales of Xpeng Motors did not meet expectations. He pointed out that in addition to the pressure brought to Xpeng by the market performance of competitors such as Huawei Wenjie, BYD and Tesla, Xpeng also has problems in product positioning, marketing, cost control and supply chain management.

Zhan Junhao mentioned that Xpeng Motors may not accurately grasp consumer needs in terms of product positioning, and the strength and effect of marketing are insufficient, resulting in limited brand influence. At the same time, high R&D and production costs affect the competitiveness of product prices. Supply chain management issues, such as unstable raw material availability and inefficient production processes, also had a negative impact on sales.

Regarding the expansion of Xpeng's net loss in 2023, Zhan Junhao believes that this will have a negative impact on the company's development. Increased financial pressure may affect R&D, marketing and capacity expansion, declining investor confidence may affect stock prices and financing ability, and sustained losses may lead to a decline in market competitiveness and difficulty in competing with competitors.

How to break the situation under the double pressure of performance and sales?

Faced with the dual pressure of performance and sales in 2023, Xpeng Motors has clearly recognized the seriousness of the problem and has begun to take a series of measures to deal with the challenges.

Xpeng Motors has made it clear that in the context of increasingly fierce competition in China's automotive industry, the key to achieving profitability and sustainable development is to scale up and reduce operating costs through intelligent driving technology.

Gu Hongdi, honorary vice chairman and co-president of Xpeng Motors, told reporters that the company's technology cost reduction and business improvement plan has achieved initial results, and the gross profit margin of automobiles in the fourth quarter increased by about 10 percentage points from the previous quarter. In addition, Xpeng Motors has more than 45 billion yuan in cash on hand at the end of 2023, which provides a solid financial guarantee for the company to achieve high-quality and high-speed growth in the fierce market competition.

To further reduce costs and improve efficiency, Xpeng launched the SEPA 2.0 Fuyao architecture in 2023. This new architecture maximizes commonality between models by integrating intelligent systems, powertrains, and vehicle platforms into a single intelligent platform. This platform-based R&D strategy not only helps reduce supply chain and manufacturing costs, but also accelerates the company's goal of reducing BOM costs by 25% by the end of 2024, while significantly improving the efficiency of R&D iterations.

In terms of sales network, Xpeng Motors has carried out a new round of channel upgrades through the "Jupiter Plan". In 2023, the company introduced more than 160 excellent dealer partners, covering 40 lower-tier cities. These adjustments not only improve the ability of the sales channel, but are also expected to make a significant contribution to sales from the second quarter of 2024 onwards.

He Xiaopeng said at the results conference that Xpeng Motors will start an innovative dealer cooperation model from the second quarter of 2024. This model will speed up the terminal delivery speed and fully activate the enthusiasm of dealers by establishing a channel inventory of about half a month, so as to effectively increase sales. At the same time, the company will strictly control the inventory level through the system and monitoring mechanism, and implement a unified national price strategy to avoid the drawbacks of the traditional dealer sales model.

In addition, Xpeng also plans to accelerate the sinking of channels, and is expected to increase the total number of sales stores to 600 in the third quarter of 2024. This expansion and change will be a key part of Xpeng's sales growth strategy.

In terms of product iteration, Xpeng's new products have also shown strong market competitiveness. Taking the Xpeng X9 as an example, this newly launched pure electric MPV model has delivered nearly 4,000 units in just two months, continuing to lead the market for pure electric MPVs and pure electric three-row seats. The company expects the X9 to see a significant sequential increase in sales in March and April.

Despite this, in the face of intensified competition in the auto market, Xpeng Motors is still under a lot of pressure. Can He Xiaopeng salvage the situation and give the capital market a satisfactory answer? As one of the earliest "survivors" of car manufacturing, the survival and development of Xiaopeng Motors is of typical significance.