XPeng: After enduring bitterness, XPeng is about to transform into a soaring 'Roc'?

$XPeng(XPEV.US) XPeng released its Q1 2024 financial report after the Hong Kong market closed and before the U.S. market opened on May 21, 2025, Beijing time. The Q1 performance was in line with expectations, but the Q2 guidance shows marginal improvement. Key highlights:

1) Auto gross margin remained in the low double digits, continuing to improve sequentially: Although the average selling price (ASP) declined this quarter (due to higher sales of the budget Mona M03 and discounts on older models), the auto gross margin reached 10.5%, up 0.5 percentage points sequentially, slightly exceeding market expectations of 10%. This was driven by economies of scale from strong sales of the M03 and P7+.

2) Q2 delivery guidance met expectations: Q2 delivery guidance of 102,000–108,000 units implies average monthly sales of 34,000–37,000 in May/June, flat compared to April's actual sales of 35,000 units. This is reasonable as the major product cycle will only kick off in Q3.

3) ASP implied by revenue guidance rebounded sequentially: The implied ASP of ¥158,000 rose ¥5,000 sequentially, reflecting marginal improvement due to a higher mix of the upgraded G6 and G9 models.

4) Operating expenses were well-controlled, and Non-GAAP operating profit significantly exceeded expectations due to other income: R&D expenses were ¥1.98 billion, ¥100 million above expectations, driven by smart R&D and preparations for new models (5 upcoming launches, including the Mona 03 with advanced driving assistance). However, Non-GAAP operating profit and net profit beat expectations mainly due to a ¥540 million other income (government subsidies) and better-than-expected gross margins.

Dolphin Research's view:

Overall, XPeng's Q1 performance was solid, with gross margins slightly exceeding expectations. The beat on Non-GAAP operating profit and net profit was largely due to a ¥550 million other income (government subsidies).

Q2 delivery and revenue guidance, while in line with expectations, still show marginal improvement. Given that new products won’t ramp up until Q3, this guidance is decent.

Dolphin Research believes XPeng remains one of the most promising EV players:

① Strong product cycle ahead:

XPeng’s 2025 product pipeline includes the Mona M03 with advanced driving assistance and a mid-size SUV launching in late Q2, with volume expected in Q3. Three range-extended models and a refreshed P7 will follow, ensuring strong sequential delivery growth in Q3 and beyond.

This robust pipeline highlights:

a. Successful cost reductions in the supply chain: XPeng has improved its supply chain efficiency, achieving low double-digit gross margins even with an ASP of ¥150,000 (down from ¥250,000 last year). Upgraded G6/G9 models also feature better range and chassis at lower prices, paving the way for competitive future products.

b. High R&D efficiency: With quarterly R&D expenses of just ¥2 billion (below peers), XPeng leads in smart driving R&D (planning L3 autonomy by late 2025) and will launch range-extended models in Q3, showcasing its efficiency.

XPeng’s optimized supply chain, R&D, and organizational structure position it for sustained success.

② Underestimated potential of range-extended models:

XPeng’s range-extended models, launching in Q3, feature an 800V platform compatible with a 5C ultra-fast charging battery (450 km range in 10 minutes). With a "large battery + small fuel tank" design, they offer 430 km pure-electric and 1,400 km total range—best-in-class for this segment.

XPeng’s 2025 P/S multiple has dropped from 2.3–2.4x pre-Q1 earnings to 1.7x, reflecting weak orders for the upgraded G6/G9 (7,000–8,000 weekly). However, Dolphin Research sees 20–30% upside if deliveries reach 450,000–500,000 units this year.

With operational improvements and new models ramping in Q3, XPeng’s range-extended vehicles could surprise positively.

Key details:

1. Auto gross margin held up at 10.5%, slightly above expectations

Q1 auto gross margin of 10.5% (+0.5 pp sequentially) beat the 10% consensus, driven by scale effects despite a lower ASP (¥153,000, down ¥7,000 sequentially) from higher Mona M03 sales (50% mix) and discounts.

2. Q2 guidance implies flat deliveries but higher ASP

Q2 delivery guidance of 102,000–108,000 units suggests stable monthly sales (~35,000). The implied ASP of ¥158,000 (+¥5,000 sequentially) reflects a better model mix.

3. Operating profit beat on government subsidies

Non-GAAP operating loss narrowed to -¥800 million (vs. consensus -¥1.8 billion), aided by ¥540 million in subsidies. R&D expenses were ¥1.98 billion (vs. ¥1.86 billion expected).