XPeng accelerates towards profitability

Author | Wang Xiaojun

Editor | Zhou Zhiyu

With narrowed losses, soaring gross profits, and ample cash, XPeng has delivered its best performance ever, jumping out of last year's quagmire to become one of the most talked-about car companies this year.

On August 19, XPeng's Q2 2025 financial report showed total revenue reaching 18.27 billion yuan, a year-on-year increase of 125.3%, with net losses narrowed to 480 million yuan. More notably, its automotive gross margin has improved for eight consecutive quarters, reaching a historic high of 14.3%.

It seems that XPeng's Chairman and CEO He Xiaopeng's promise of achieving quarterly profitability in Q4 this year may not be too difficult.

However, after several phase victories, XPeng's real challenges continue amid the expansion of numerous businesses and intense industry competition.

Approaching Quarterly Profitability

Although still not profitable, XPeng's current status undoubtedly represents its best historical performance.

In Q2 this year, XPeng's performance was remarkably strong across the board. The total revenue of 18.27 billion yuan ranks among the top in the new car-making forces, and the 15.6% quarter-on-quarter growth demonstrates a strong growth momentum.

Behind this is a several-fold increase in sales. In Q2, XPeng's delivery volume reached 103,181 units, a year-on-year increase of 242%. It is evident that after recovering growth momentum since the second half of last year, XPeng's strength has continued this year with the support of new and updated models.

It is worth mentioning that XPeng's performance in overseas markets this year has also been impressive. In the first half of 2025, its overseas delivery volume exceeded 18,000 units, a year-on-year increase of over 200%, becoming the sales champion of Chinese new force brands in several countries, including Norway, France, and Singapore.

Meanwhile, XPeng's profitability improvement this quarter is the most significant. Its automotive gross margin is 14.3%, an increase of 3.8 percentage points quarter-on-quarter. Driven by the automotive business, the company's overall gross margin also reached 17.3%.

The improvement in gross margin is primarily attributed to the optimization of product structure. In Q2, the sales proportion of XPeng's high-priced models (such as the updated G6/G9/X9) increased by 17 percentage points quarter-on-quarter, while the entry-level MONA M03's proportion decreased by 12 percentage points quarter-on-quarter. This indicates that high-value models are becoming the main sales force, directly driving the structural improvement of gross margin. Additionally, the strong sales of high-spec versions have also played a significant role, with the Max version of MONA M03 consistently accounting for over 80% of its total orders.

On the other hand, the results of systematic cost reduction efforts are becoming evident. For several years, XPeng has been committed to platform-based technology and supply chain optimization. Now, by applying platform-based and modular design concepts across multiple models, XPeng has effectively reduced the manufacturing cost per vehicle, providing a solid foundation for maintaining product pricing flexibility and profitability in fierce market competition.

Furthermore, the technology licensing business continues to bring considerable revenue to XPeng. Just last week, XPeng announced the expansion of its strategic cooperation with Volkswagen Group on electronic and electrical architecture technology. XPeng stated that it expects to start recognizing licensing fees after the new model SOP (Start of Production), which will become the third stable revenue stream following vehicle sales and technical services In terms of financial health, XPeng's cash flow situation has also significantly improved. In the second quarter, free cash flow exceeded 2 billion yuan, and total cash on hand at the end of the quarter surpassed 47.5 billion yuan.

With the support of soaring revenue, XPeng has also been generous in its investment in research and development and marketing. In the second quarter, its R&D expenses increased by 50.4% year-on-year to 2.21 billion yuan; sales, general, and administrative expenses were 2.17 billion yuan, up 37.7% from 1.57 billion yuan in the same period of 2024.

From various indicators, XPeng is just one step away from quarterly profitability. He Xiaopeng's promise of profitability in the fourth quarter is becoming increasingly likely.

Continuing to Scale Up

Industry insiders say that XPeng has changed, and this change is not just about launching a few popular models.

In past press conferences, XPeng would spend a lot of time discussing technology, even jokingly referring to itself as "obsessed with technology." Now, while technology remains core, meeting user needs and insights into user emotions have been elevated to unprecedented heights. If previously XPeng focused on expressing "what I have done," it now emphasizes "what users can feel."

Starting with the MONA M03, XPeng has been emphasizing aesthetics. Beyond technology, He Xiaopeng has set new standards for his cars: design, aesthetics, quality, and emotion. At the recent debut of the all-new P7, he openly stated, "Now aesthetics and technology are equally important, but aesthetics lead by half a step."

The pre-sale performance of this car confirms the correctness of this shift: without announcing a pre-sale price, it garnered over 10,000 small orders in just 397 seconds, setting a new historical high for XPeng.

"Emotional value" is another keyword that He Xiaopeng repeatedly mentions. For example, the all-new P7 is equipped with a three-axis dynamic central control screen that can respond to voice and gesture commands, and its AR-HUD even allows drivers to "throw emojis" at the car in front to release road rage. Technology is a means; the emotional value brought by functionality is what users can tangibly feel.

Riding the current momentum, XPeng will continue to scale up.

XPeng expects third-quarter deliveries to reach 113,000 to 118,000 vehicles, a year-on-year increase of 142.8% to 153.6%. This means that to achieve this goal, XPeng's monthly delivery volume in September must steadily reach the 40,000 mark.

In the earnings call, He Xiaopeng expressed high hopes for the all-new XPeng P7, believing its sales could rank among the top three in the pure electric sedan market under 300,000 yuan.

What is even more noteworthy for the market is that in the fourth quarter of this year, the XPeng X9 will be refreshed as the first Kunpeng super electric vehicle model, offering over 450 kilometers of pure electric range and over 1,500 kilometers of comprehensive range. This marks XPeng's official entry into the extended range market, expanding from a "pure electric" single track to a "pure electric + extended range" dual-track layout.

This move not only directly confronts competition from leading brands like Li Auto and Aito but will also greatly broaden its user coverage, which is crucial for future sales growth. He Xiaopeng is very confident about this, stating that it has "fully opened up a technological gap with competitors."

Additionally, XPeng's Robotaxi business has also made new progress. He Xiaopeng revealed that models supporting L4 level will be mass-produced in 2026 and will pilot Robotaxi operations in certain areas However, the brief victory is not the end. The promise of quarterly profits still requires strict cost control and stable sales as guarantees. At the same time, the influx of new players such as Huawei and Xiaomi continues to bring pressure in terms of traffic and technology, and the shadow of price wars has not yet dissipated.

How to truly and sustainably convert technological advantages into market dominance, as well as how to balance resources and execute effectively across multiple fronts such as range extension, globalization, and Robotaxi, will be the higher intensity challenges that XPeng will face in the next stage