XPeng 3Q25 Quick Interpretation: The "slightly cold" car sales business meets the hot AI expectations.

Due to XPeng's recent updates on AI advancements during last week's Tech Day, the stock price has risen to a relatively high historical level of $25 driven by AI sentiment, thus the market has high expectations for XPeng's financial report.

However, in terms of actual performance, the car sales business in the third quarter fell short of expectations, and the guidance for sales and revenue in the fourth quarter is also relatively weak, both below expectations.

Specifically, the third-quarter revenue was 20.38 billion, missing the market expectation of 20.47 billion, mainly due to car sales revenue falling short of expectations.

This quarter's car sales revenue was 18.05 billion, significantly below the market expectation of 18.82 billion, as XPeng's car sales price did not stabilize and further declined by 8,000 yuan quarter-on-quarter to 156,000 yuan, while the market expected only a slight quarter-on-quarter decline of 2,000 yuan. Dolphin Research believes the main reason for the quarter-on-quarter decline in car sales price is the increased promotional discounts in the third quarter, and the model structure is still sinking, not following the upward route as XPeng expected.

However, this quarter's service and other business revenue was 2.33 billion, significantly higher than the market expectation of 1.66 billion, mainly due to achieving an important milestone in cooperation with Volkswagen, leading to a quarter-on-quarter increase in technical R&D service revenue from Volkswagen.

Regarding gross margin, this quarter's gross margin was 20.1%, up 2.8 percentage points quarter-on-quarter, significantly exceeding the market expectation of 17.8%. The higher-than-expected gross margin is mainly due to the service and other business gross margin rising sharply by 21 percentage points quarter-on-quarter to 74.6%, with the increase also attributed to the recognition of large and almost pure gross margin technical R&D service revenue this quarter.

However, in the car sales business, due to the quarter-on-quarter decline in car sales price, despite the scale effect bringing down the unit cost, the car sales gross margin still declined by 1.2 percentage points quarter-on-quarter to 13.1% this quarter, below the market expectation of 14.4%.

In the fourth-quarter guidance, XPeng's sales and revenue guidance are both significantly below market expectations:

① Sales guidance: Fourth-quarter sales guidance is 125,000-132,000 units, below the market expectation of 136,000 units. Given the known October sales of 42,000 units, the implied November/December sales are 41,500-45,000 units. Despite the fourth-quarter peak season and the rush to purchase before the purchase tax subsidy phase-out, it still falls short of expectations.

Dolphin Research believes this is mainly due to a. the new P7 and G7 orders falling short of expectations, with the new P7's sales dropping to 5,660 units in the second month after launch, and the G7's current monthly sales being only around 3,500 units; b. the fourth quarter may only see the launch of the high-priced X9 MPV extended-range version, which is expected to contribute little to fourth-quarter sales.

② Revenue guidance: Fourth-quarter revenue guidance is 21.5-23 billion, also below the market expectation of 25 billion. Due to the unpredictable contribution of service revenue from the Volkswagen cooperation, assuming the fourth-quarter service revenue remains flat with the third quarter, the implied fourth-quarter car sales price is 155,000 yuan, still declining quarter-on-quarter from the third quarter's 156,000 yuan, indicating XPeng's goal of an upward model structure is still encountering obstacles. $XPeng(XPEV.US) $XPENG-W(09868.HK)