Category: Insights

Categories
China China EV Market Insight Electric eMobility eV EV Data Insights Monthly Data Nio Research Note

Deutsche Bank on China EV sales: Jun gathering momentum

After the price cut and a series of new models, sales could reach 20,000 units per month in the third quarter, according to Edison Yu's team.

China's major electric vehicle (EV) makers recently announced their June deliveries, and Deutsche Bank analyst Edison Yu's team provided their take, as usual.

"June EV sales surprised to the upside as demand picked up, likely signaling some normalization in consumer behavior and release of pent-up demand from buyers taking advantage of low prices," the team said in a research note sent to investors today.

(NASDAQ: LI) again led the way among the upstarts, setting a new monthly record, while Nio (NYSE: NIO) saw a large improvement in monthly sales, driven by the speedy ramp-up of the ES6, the team noted.

Looking ahead, pressure will be on Nio and (NYSE: XPEV) to deliver big growth in the second half with new vehicle launches, while Li Auto works to increase its already strong order book, Yu's team said.

As a backdrop, Nio delivered 10,707 vehicles in June, up 73.96 percent from 6,155 in May, though down 17.39 percent from 12,961 a year earlier.

Xpeng delivered 8,620 vehicles in June, up 14.84 percent from May and the fifth sequential growth, despite a 43.64 percent decline from the same month last year.

Li Auto delivered a record 32,575 vehicles in June, surpassing the 30,000 mark for the first time.

delivered 10,620 vehicles in June, up 146.86 percent year-on-year and up 22.38 percent from May.

Yu's team said Nio deliveries were slightly below their forecast, though the new ES6 appears to be ramping up smoothly and should be a bigger contributor in July along with the full month of production of the ET5 Touring.

After the price cut and a slew of new models, Nio could reach 20,000 units per month in the third quarter, the team said.

The team said Xpeng deliveries exceeded their expectations and, most importantly, the initial reception to the new G6 looks increasingly positive.

Looking ahead, Xpeng is on track to hit at least 10,000 deliveries in July and 15,000 in September is doable, the team said.

Here is the full text of the team's research note.

June gathering momentum

June EV sales surprised to the upside as demand picked up, likely signaling some normalization in consumer behavior and release of pent-up demand from buyers taking advantage of low prices.

Total NEV retail sales appear to be tracking around 670k according to preliminary CPCA forecasts or +16 percent MoM (+26 percent YoY).

Li Auto once again led the way among the upstarts setting a new monthly record while Nio saw a large improvement MoM driven by speedy ramp up of ES6.

Looking ahead, the pressure will be on Nio and XPEV to deliver big growth in 2H from new launches while Li Auto strives to increase its already robust order book.

June OEM recap

Li Auto delivered 32,575 vehicles (+15 percent MoM; +150 percent YoY), easily beating our forecast. Looking ahead, management is targeting L8 and L9 to be +10,000 each and L7 at 15,000 in monthly sales for 3Q and then 40,000 total in 4Q.

To support this, we are expecting a cheaper variant of the L9 to be available later in the year.

Separately, the first BEV (Li MEGA) is set to be unveiled in 4Q, catering to the >500k RMB segment.

The company exited the month with 331 retail stores and 323 servicing centers.

Nio delivered 10,707 units (+74 percent MoM; -17 percent YoY), slightly below our forecast.

The new ES6 appears to be ramping up smoothly and should be an even bigger contributor in July along with a full month of ET5 Touring production. New ES8 deliveries also began in the last few days of June.

Following the price cut and slew of new models, we think 20,000 in monthly sales is achievable during 3Q.

Nio exited the month with ~1,500 battery swap stations.

XPeng delivered 8,620 units (+15 percent MoM; -44 percent YoY), ahead of our expectations. P7 sales increased 17 percent MoM to nearly 5,200.

Most importantly, the initial reception to the new G6 is looking increasingly positive.

Starting price will be just 210k RMB and management raised its pre-sale number to +35,000 units (vs. prior +25,000), suggesting a robust pipeline of deliveries for 3Q.

Looking ahead, we expect July can reach at least 10,000 deliveries and 15,000 in September is doable.

Zeekr delivered sales of 10,620 vehicles (+22 percent MoM; +147 percent YoY). Looking ahead, Zeekr is offering some promotions through September on the 001 (likely in response to ET5 Touring competition) including free upgrade options on exterior color, larger 100 kWh battery, dual-motor 4WD, air suspension, and/or charging credits.

In addition, the company is providing special financing offers on all models.

Recall, Zeekr is targeting 140,000 in total unit sales this year (<43,000 through 6 months so far).

Nio deliveries rebound to 10,707 units in Jun as new models bring relief

The post Deutsche Bank on China EV sales: Jun gathering momentum appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Categories
China Electric eMobility eV Insights Policy Research Note

China’s extended tax breaks should facilitate steady EV sector growth, Fitch says

PHEVs get the same tax exemption as BEVs, and the extension of the tax break will attract more automakers to the market, Fitch said.

(Image credit: CnEVPost)

China last week extended tax incentives for new energy vehicles (NEVs) for four years, a move that in the view of international credit rating agency Fitch Ratings could help renew electrification momentum.

China's extension of tax breaks for electric vehicle (EV) purchases should facilitate steady growth in the sector, while the continued coverage of subsidies for plug-in hybrid electric vehicles (PHEVs) reinforces Fitch's view that such vehicles will be a key catalyst for China's transition to EVs, analyst Jing Yang's team said in a June 28 research note.

On June 21, China's Ministry of Finance announced that NEVs with a purchase date between January 1, 2024, and December 31, 2025, will continue to be exempt from vehicle purchase tax, but the exemption will not exceed RMB 30,000 yuan ($4,340) per vehicle.

For NEVs with a purchase date between January 1, 2026 and December 31, 2027, the vehicle purchase tax will be levied at half the normal rate, with a tax reduction of no more than RMB 15,000 per vehicle.

"We believe the renewal of tax waivers for consumers purchasing EVs until end-2025 aligns with market expectations. Purchase taxes will be halved in 2026-2027 and then return to normal levels," Fitch said.

Sales of PHEVs, including extended-range electric vehicles (EREVs), will continue to grow rapidly under the updated policy, with these vehicles receiving the same tax exemption as battery electric vehicles (BEVs), the note said.

PHEVs are a close substitutes to traditional internal combustion engine vehicles because drivers do not suffer from mileage anxiety or charging inconvenience, and are therefore widely seen as a transitional product before the market shifts completely to BEVs, Fitch said.

PHEVs' share of China's EV market soars from 17 percent in 2021 to 28 percent in January-May 2023, Fitch said.

Competition in the PHEVs segment has intensified, and the extension of tax breaks will attract more automakers to the market, according to the note.

Plug-in hybrids are an easier sub-segment for traditional automakers to compete in than BEVs, with Great Wall Motor, and Changan Automobile all launching competitively priced plug-in hybrids this year, Fitch said.

Joint venture brands, despite having a firmer foothold in the market, have been slowed due to their global parent companies' focus on BEVs and less attractive pricing, the note said.

Tax breaks for high-end EVs will remain in place, which could ease local automakers' concerns about upgrading to premium EV brands, did not expect the waivers to be renewed, and should incentivize traditional luxury carmakers to transition faster toward EVs, Fitch said.

The latest program exempts consumers who buy battery swap-enabled EVs from the battery tax for the first time, Fitch noted, saying it expects this to benefit EV brands selling high-end BEVs with battery swap capability and to encourage automakers to adopt the model.

Overall, Fitch believes the subsidy extension will have little impact on EV sales in China in 2023 and continues to forecast EV deliveries to grow by more than 30 percent during the year and EV market penetration to reach 35 percent.

However, the extension could reduce front-loaded purchases in the fourth quarter of 2023, as consumers will no longer be eager to take advantage of expiring tax breaks, Fitch said.

($1 = RMB 7.2506)

China's Ministry of Finance explains in detail how consumers will enjoy NEV tax breaks in 2024-2027

The post China's extended tax breaks should facilitate steady EV sector growth, Fitch says appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Categories
China China NEV export Electric eMobility eV Insights Research Note

Chinese brands expected to contribute 9% of NEV sales in Western Europe in 2023, says TrendForce

Western Europe is a traditional stronghold for international carmakers, and it's difficult for Chinese brands to stand out, TrendForce said.

(Image credit: CnEVPost)

Chinese brands are expected to increase their share of the Western European new energy vehicle (NEV) market to 9 percent in 2023, up from 6 percent in 2022, market research firm TrendForce said in a report today.

SAIC's MG is the dominant Chinese brand in the Western European NEV market, according to the report.

Chinese exports of NEVs are primarily aimed at Western European countries with clear timetables for phasing out fuel vehicles, as well as Southeast Asia, especially Thailand, where penetration of such vehicles is low, TrendForce noted.

Western Europe is the home base of traditional international car manufacturers, and it is difficult for Chinese brands to stand out, the report said.

However, it is worth noting that Chinese NEVs emphasize high cost-efficiency and intelligence, and affordable electric vehicles can meet demand against the backdrop of high inflation facing Western Europe, TrendForce said.

In Southeast Asia, where Chinese brands entered early, the number of NEVs here is small, in the tens of thousands range, but the share of Chinese brands is high, the report said.

In 2023, the market share of Chinese brands in the Southeast Asian NEV market is expected to rise to 63 percent from 52 percent in 2022, TrendForce said.

This is a major concern for Japanese brands, which have long had a high market share in the Southeast Asian auto market, the report said.

Entering new markets requires a significant investment of resources, including the establishment of showrooms, after-sales maintenance service systems, charging infrastructure and compliance with local regulations.

Therefore, how to maintain price advantages while adding additional costs will be key to the success of Chinese auto brands overseas, according to TrendForce.

China's NEV industry developed early and has advantages in supply chain, productivity, cost-effective lithium iron phosphate (LFP) battery technology and production capacity, the high report also noted.

Chinese battery makers have layout in global upstream lithium resources, so their cost control and component supply stability are higher, becoming an advantage for Chinese car manufacturers when expanding overseas markets, the report said.

NEVs accounted for more than 25 percent of China's auto exports in the first quarter of 2023, and NEVs will be the focus of future expansion into overseas markets, TrendForce said.

Tesla contributes half of all NEV exports from China in H1

The post Chinese brands expected to contribute 9% of NEV sales in Western Europe in 2023, says TrendForce appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Categories
CATL China Electric eMobility eV Insights Research Note

CATL shares plunge after Morgan Stanley downgrades rating to underweight

Second-tier battery makers may adopt a more aggressive pricing strategy to gain market share in the second half of the year, and could face increasing risks to its market share and margins in the domestic market, Morgan Stanley said.

Morgan Stanley downgraded its rating on CATL, citing market share risks, sending shares of the Chinese power battery giant tumbling in morning trading.

"We downgrade CATL to UW as we think second-tier battery makers may adopt more aggressive pricing strategies to gain market share in 2H23," analyst Jack Lu's team said in a research note sent to investors earlier today.

As of press time, CATL shares traded in Shenzhen were down about 6 percent to near their lowest point of the year.

Earlier this year, Morgan Stanley upgraded CATL to equal weight, while being bearish on most battery material makers, as it believes CATL is better able to respond to slowing demand and leverage its cost advantages and bargaining power across the broader value chain.

Now, Lu's team believes that the dual-sourcing battery strategy of local EV companies may help the Tier 2 battery makers achieve their goals, while CATL may face increasing risks in terms of market share and margins in the domestic market.

In February, CATL launched a lithium rebate program to trade cheap lithium resources for market share. However, the subsequent plunge in lithium prices to below RMB 200,000 per ton has led to significant uncertainty about the program, the team said, adding that they have not received any further news about the program.

Meanwhile, battery makers have been offering fairly significant price cuts against the backdrop of falling lithium prices in the second quarter, the team noted.

"Our checks with tier-two battery makers indicate that the price cuts could be in the range of 10-20% during the quarter, with some battery makers likely offering more aggressive cuts than others," the team wrote.

Such actions could threaten CATL's market share in its domestic market, and market share potential is an important stock price driver, the team said.

CATL's power battery installed base in China was 10.26 GWh in April, ranking first with a 40.83 percent share, but down from 44.95 percent in March, China Automotive Battery Innovation Alliance (CABIA) data from last month showed. Data for May is Expected to be available in a few days.

(NYSE: NIO) and (NASDAQ: LI) are bringing in new battery suppliers instead of making CATL their sole supplier, Lu's team noted.

"With many new models being launched in the domestic EV market, we think CATL's domestic market share could come under pressure," the team said.

As background, since late last year, regulatory filings for NIO's new NT 2.0-based models have shown battery suppliers that include the smaller CALB in addition to CATL.

Last month, NIO filed to use semi-solid-state batteries from Beijing WeLion New Energy Technology in its models.

On February 8, Li Auto officially launched its first five-seat SUV, the Li L7, and announced the introduction of Sunwoda Electric Vehicle Battery and Svolt Energy as new battery suppliers.

More and more Tier 2 companies are adopting increasingly aggressive pricing strategies, and CATL may have to do the same, according to Lu's team.

Despite a short-term recovery in value chain orders, there will still be excess battery capacity in the short term and price competition is inevitable, the team said.

In addition to the market share pressure it faces domestically, Lu's team believes CATL's overseas path is increasingly uncertain.

"Some investors have argued that CATL's market share overseas is yet to see signs of decline; however, in our view CATL's overseas market is under increasing scrutiny and becoming more and uncertain, limiting visibility," the team wrote.

CATL has tried to penetrate overseas markets through exports and localization of production, but both pathways are increasingly at risk due to geopolitical tensions, particularly in the US, the team said.

Notably, Lu's team stressed that if the cost of battery materials and minerals continues to fall, this could give car companies more room to pursue new technologies and other battery performance metrics.

"If this is the case, CATL could regain any lost market share and continue to dominate the global battery market, leveraging its strong R&D capabilities and bargaining power over the supply chain. Our bull case scenario assumes 60% global market share in the long term," the team wrote.

Global EV battery market share in Jan-April: CATL 35.9%, BYD 16.1%

The post CATL shares plunge after Morgan Stanley downgrades rating to underweight appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Categories
China Electric eMobility eV Insights Nio NIO ES6 Order Backlog Research Note

NIO’s new order intake hits year-to-date high with launch of new ES6, Morgan Stanley says

Confirmed orders for the ES6 accounted for 35-40 percent of new orders in May, meaning inflows since the model's launch in the last week of May have been quite meaningful, Morgan Stanley said.  |  US | NIO HK | NIO SG

(Image credit: CnEVPost)

The new ES6 is critical for NIO (NYSE: NIO) to turn around its weak sales performance. So what has the model contributed to NIO since its launch? A new research note from Morgan Stanley provides a good reference.

NIO's overall new order intake hit a year-to-date high, boosted by the launch of the new ES6, analyst Tim Hsiao's team said in a research note sent to investors on June 5.

The team said they have been tracking some feedback from startups' major sales channels in major Chinese cities since early last year to better understand the latest market dynamics.

The team shared their key findings in their research note while noting the limitations of their sampling methodology.

Confirmed orders for the ES6 accounted for 35-40 percent of new orders in May, implying quite a meaningful inflow since the model hit the market in the last week of May, the team said.

As background, NIO officially launched the new ES6 on May 24 and delivered it to its first owners the same night, the fastest from launch to delivery in the company's history.

Including the battery, the new ES6 has a starting price of RMB 368,000 ($51,680), making it NIO's least expensive SUV.

NIO saw overall traffic at its flagship stores in Tier 1 cities increase 30-40 percent month-on-month in May and continued that momentum in early June after the company brought the new ES6 to market, Hsiao's team said, citing their latest checks.

"Overall store traffic at the stores we track is back to the level seen this February but still 20% below last September's level, when the company rolled out ET5," the team said.

NIO stores' retail conversion rate -- the ratio of orders to traffic -- remained largely steady at 5 percent in May, the team said, adding that consumers need more time to get a closer and deeper look at the new model and they expect conversion rates to climb gradually with broader test drives.

Hsiao's team believes the starting price for the new ES6 looks a bit conservative, but their checks last week at major NIO flagship stores in Tier 1 cities suggest that order momentum has been picking up.

"Certain stores we talked to further suggest that NIO's orders as a whole exceeded 9k units in May. Within this, ES6 basically dominated order inflow after taking confirmed orders from last week of May," the team said.

On a full-month basis, the new ES6 accounted for more than 35 percent of total orders, which suggests a quite meaningful turnaround at the end of the month, the team said.

Orders for NIO look a bit overly concentrated at the moment, Hsiao's team said, adding that some salespeople they interviewed suspended order intake for the ES8 and EC6 during the model changeover.

NIO's sedan models, such as the ET7, saw orders drop by about 20 percent in May from a year earlier, according to the team.

"ET5 and the all-new ES6 contribute about 80% of new orders, implying likely greater volatility if other high-margin models fail to catch up," the team said.

Notably, NIO is still in the process of getting the new ES6 capacity to climb, and the model contributed very little to deliveries last month.

The EV maker delivered 6,155 vehicles in May, down 7.55 percent from April and down 12.37 percent year-on-year, according to data released June 1.

The deliveries included 2,396 SUVs and 3,759 sedans, NIO said.

NIO will complete the capacity ramp for the new ES6 in June to deliver vehicles as soon as possible, Jim Wei, the company's senior vice president of customer operations, said in a June 1 announcement of May delivery figures on the NIO App.

($1 = RMB 7.1212)

NIO Q1 earnings preview: Struggling along for another quarter

The post NIO's new order intake hits year-to-date high with launch of new ES6, Morgan Stanley says appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Categories
China Earnings Earnings Preview Electric eMobility eV Insights Nio Research Note

NIO Q1 earnings preview: Struggling along for another quarter

Deutsche Bank expects to report soft results for the first quarter, with downside risk to margins, though some relief in on the way.

NIO (NYSE: NIO) will report first-quarter unaudited financial results on Friday, June 9, before the US markets open. As usual, Deutsche Bank analyst Edison Yu's team provided their preview.

"NIO is suffering from weaker-than-expected demand and is facing its greatest adversity since nearly going bankrupt in 2020," the team said in a research note sent to investors today titled "Struggling along for another quarter."

The team expects NIO to report soft results in the first quarter, with downside risk to margins, and a very weak outlook for sales, and margins in the second quarter.

First quarter earnings

Previous data showed that NIO delivered 31,041 vehicles in the first quarter, slightly above the lower end of the guidance range of 31,000 to 33,000 vehicles.

NIO's previous revenue guidance for the first quarter was between RMB 10.93 billion and RMB 11.54 billion, implying year-on-year growth of about 10.2 percent to 16.5 percent.

Yu's team expects NIO to report revenue of RMB 10.9 billion in the first quarter, with a gross margin of 2.5 percent and adjusted earnings per share of RMB -3.07.

This compares to the current analyst consensus estimates of RMB 11.7 billion, 7.4 percent, and RMB -2.66, respectively, in a Bloomberg survey.

Looking ahead, Yu's team expects NIO to deliver 21,000-23,000 units in the second quarter.

NIO delivered only 12,813 units in April and May combined due to very low demand for the ET7 and ES7, the team noted.

The EV maker delivered 6,155 vehicles in May, down 7.55 percent from 6,658 in April, according to data released on June 1.

Why the weak sales?

While production and supply chain issues appear to be resolved, underlying demand for NIO's premium BEVs has been disappointing as customers opt for gasoline models from German luxury carmakers BMW, Mercedes-Benz, Audi and EREVs, Yu's team said.

The team attributed NIO's recent weak sales to 3 main factors. The following is from their research note:

1. NIO's pricing is the highest amongst the start-ups and premium BEV demand has been generally weak across the board.

2. The premium segment appears to be electrifying more slowly which may be counter-intuitive to those outside China. Based on our analysis of the premium SUV market (>300k RMB), the BEV mix is only 12% YTD, compared with PHEV (includes EREV) at 18%, leaving 70% for ICE.

This compares with the overall market that is 21% BEV and 10% PHEV, showing customer preferences are quite different depending on the sub-segment.

Our read is the EREV value position is resonating with a much broader audience than anticipated which Li Auto has done a very effective job at maximizing.

3. We believe NIO's brand appeal has hit a wall of sorts as it is struggling to get momentum outside of Shanghai (and surrounding provinces) and also beyond finance/tech social circles.

To illustrate this, we look at the performance of NIO's best-selling ET5. Nearly 40% of sales mix comes from this region and ET5 sells quite poorly in the south despite in theory having the broadest appeal amongst NIO's offerings.

Moreover, based on our channel checks, affluent older customers simply are not buying into the brand (yet) and still prefer traditional BBA cars.

Management will need to figure out ways to augment the appeal of its unique services such as battery swapping. For existing customers, the usage is actually quite high, having set records during recent holiday (69k swaps in one day or ~20% of car parc).

Some relief on the way

NIO officially launched the new ES6 -- the best-selling NIO SUV in history -- in China on May 24, and deliveries began the same night.

In addition to the new ES6, NIO will also begin deliveries of the new ES8 and the ET5 Touring, a derivative of the ET5 sedan, this month.

NIO's deliveries in June will get a boost from a full month of new ES6 deliveries and partial contributions from the ET5 Touring, Yu's team said.

The new ES6 starts at RMB 368,000, higher than expected, as many potential buyers are comparing it to the Li Auto Li L7, which starts at RMB 319,800, the team said.

(Image credit: CnEVPost)

For the ET5 Touring, the team expects pricing to be at RMB 335,000 - RMB 345,000, slightly higher than the regular ET5.

NIO management aims to capitalize on the success of the 001, which proves there is a sizable local market for luxury sport EV wagons, the team said.

Yu's team expects NIO to see only a minimal improvement on vehicle margins in the second quarter.

"While lower battery input costs should help by at least 1-2% sequentially along with phasing out of aggressive promotional activity on first-gen 866 models, this will be partially offset by lack of overhead absorption/higher D&A as overall volume in 2Q will be down materially compared with 1Q," the team wrote .

As sales improve in the second half of the year, auto margins should return to double digits, the team said.

On the operating cost side, with sales under so much pressure, Yu's team suspects NIO management may be forced to show some level of restraint.

"We are skeptical NIO can achieve 'core' breakeven in 4Q23 and overall breakeven in 2024," the team wrote.

Also, cash burn will intensify due to declining deliveries, similar to what XPeng is experiencing, the team said, adding that they suspect NIO management will roll back its previous RMB 10 billion capex outlook.

Notably, the team remains bullish on the company's prospects, despite many investors have lost patience after multiple sales and margin disappointments.

"We think the stock is already embedding in a very negative path forward and we reiterate NIO's longer-term strategy of having multiple brands, holistic charging infrastructure, and an aspirational ecosystem can still ultimately win out once the dust settles on the EV wars," The team wrote.

NIO's local peers react to launch of new ES6

The post NIO Q1 earnings preview: Struggling along for another quarter appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Categories
China Electric eMobility eV Insights Research Note XPeng XPeng G6

XPeng making its last stand with G6, says Deutsche Bank

With margins and cash burn looking worse following first-quarter earnings, management may be making its last stand with the G6, Deutsche Bank said.  |  XPeng US | XPeng HK

(Image credit: CnEVPost)

XPeng (NYSE: XPEV) is expected to officially launch its new SUV, the G6, late next month, which analysts say will be crucial as the company continues to face weak sales and financial performance.

"With margins and cash burn looking materially worse following 1Q earnings, we believe management may be making its last stand with the G6," Deutsche Bank analyst Edison Yu's team said in a research note sent to investors yesterday.

The team's previous view assumed XPeng could see stable natural margin improvement from the sharp drop in battery input prices, but those savings were mostly offset by incremental promotional activity and a poor mix.

" Therefore, the importance of the upcoming G6 has become even GREATER," the team wrote.

XPeng reported weaker-than-expected first-quarter earnings on May 24, with gross margins plunging to 1.7 percent. As a comparison, that figure was 12.2 percent and 8.7 percent in the same quarter last year and the fourth quarter of 2022, respectively.

The company reported a negative 2.5 percent vehicle margin in the first quarter, compared to 10.4 percent in the same period in 2022 and 5.7 percent in the fourth quarter of 2022.

The decline was due to increased sales promotions and the expiration of the new energy vehicle (NEV) subsidy in China, XPeng said.

XPeng's new SUV, the G6, will officially launch in June, with volume deliveries starting in July, and production capacity will climb quickly, its management said in a May 24 analyst call after announcing first-quarter earnings.

The G6 will be a hot seller in China's new energy SUV market priced between 200,000 yuan ($28,200) and 300,000 yuan, and will enable XPeng's total deliveries to grow well above the industry's pace in the third quarter, the company said.

The G6 has been set aside about two months from the start of production to delivery, and XPeng expects the model to reach more than twice the sales of the P7i, its management said.

That means, according to Yu's team, that XPeng management expects the G6 to sell 6,000-8,000 units a month.

The G6 needs to be successful for XPeng to be truly relevant to the market again, the team said.

XPeng will likely price the G6 significantly lower than the Model Y (RMB 263,900), hoping to attract consumers with a sleeker design and updated interior, the team said, adding that the X is already taking this approach with a starting price of just RMB 190,000.

A leaked image on Chinese social media on May 22 showed XPeng seeing the first production vehicle of the G6 roll off the line.

XPeng expects second-quarter vehicle deliveries to be between 21,000 and 22,000, and given that it delivered 7,079 vehicles in April, the guidance means the company expects it will deliver a total of 13,921 to 14,921 vehicles in May and June.

Yu's team also noted that XPeng's cash burn trajectory was worse than expected.

"XPeng exited 1Q23 with <25bn RMB in net cash as A/P became a big drag on working capital. This was caused by poor sales performance and also suggests to us suppliers are becoming less accommodative," the team wrote.

After months of lackluster G9 demand, XPeng management may be under pressure from suppliers to be more conservative with its outlook, the team said.

That said, XPeng's operating expenses and capex discipline are still very much intact and should at least get the company through most of next year, Yu's team said.

($1 = RMB 7.0951)

XPeng Q1 earnings miss expectations, gross margin falls to 1.7%

The post XPeng making its last stand with G6, says Deutsche Bank appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Categories
China Earnings Electric eMobility eV Insights Research Note XPeng

XPeng Q1 earnings: Deutsche Bank’s first look

" delivered even softer 1Q23 results than we previewed, accompanied by a muted 2Q outlook," Edison Yu's team said.

XPeng (NYSE: XPEV) reported weaker-than-expected first-quarter earnings today, and as usual, Deutsche Bank analyst Edison Yu's team provided their first look.

Here is the research note the team sent to investors today.

1Q23 Earnings First Look

XPeng delivered even softer 1Q23 results than we previewed, accompanied by a muted 2Q outlook.

Volume for 1Q was already reported at 18,230 units, leading to revenue of 4.03bn RMB, essentially in line with our 4.04bn estimate; vehicle pricing was slightly lower, offset by "Services and other."

Total gross margin declined 700bps QoQ to just 1.7%, missing our 5.0% estimate (consensus 6.1%), driven by lower vehicle margin (-2.5% vs. our 0.4% due to aggressive price cuts/promotions).

Opex of 2,654m came in below our model as higher R&D was offset by lower SG&A.

All together, EPS of (2.57) came in about in line with our (2.52) forecast.

Management provided a muted 2Q23 outlook, calling for 21,000-22,000 deliveries, vs. our 24,000 forecast, translating into 4.5-4.7bn RMB in revenue (vs. our 5.6bn).

This implies May/June seeing little to no MoM improvement as April garnered 7,079 units and pricing/mix facing further pressure (G9 demand still struggling and P7i constrained by component supply).

On the earnings call, we will look for further commentary on the exact timing of G6 deliveries (SOP seemingly has already begun), pricing, and volume expectations.

XPeng Q1 earnings miss expectations, gross margin falls to 1.7%

The post XPeng Q1 earnings: Deutsche Bank's first look appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Categories
China Electric eMobility eV Insights price war

Price competition in China auto industry poised to ease in May, analysts say

Discounts on passenger cars in China continued to expand in April, but the industry is seeing some positive changes heading into May.

Price competition in China auto industry poised to ease in May, analysts say-CnEVPost

(Image credit: CnEVPost)

The price wars that erupted in the Chinese auto industry in March carried over into April. However, analysts see fewer car discounts heading into May.

Discounts on passenger cars in China continued to expand in April, but the industry saw some positive changes heading into May, with price competition, especially for fuel vehicles, expected to ease, said CITIC Securities analyst Zhang Ruohai's team in a research note today.

These changes include the fact that some automakers are no longer offering increased discounts to dealers, and have even scaled back compared to the first quarter, according to the team.

With China allowing some fuel models based on existing emission standards to extend their sales period by six months until the end of this year, there is much less urgency for these models to clear inventory in the short term, the team noted.

In addition, inventory levels in the Chinese auto industry fell in April, with dealer inventory levels returning to a relatively balanced position, the team said.

From January to April, discounts offered by the Chinese auto industry were generally increasing, with actual selling price to manufacturer guide price ratios of 91.3 percent, 92.4 percent, 90.8 percent and 90.2 percent, respectively, according to an indicator compiled by the team.

This means that in addition to the price pickup in February, discounts expanded in March and April, the team said, adding that the indicator was 88.1 percent and 87.3 percent for fuel cars and 96.84 percent and 96.78 percent for new energy vehicles (NEVs) in the past two months, respectively.

Against the backdrop of overall weak consumer demand for cars, the price wars had a boost to sales of some models, but depressed total sales as consumer wait-and-see sentiment increased, according to the team.

In March, when the price war was at its most intense, Chinese passenger car retail sales were 1.587 million units, up 0.3 percent year-on-year and up 14.3 percent from February, according to the China Passenger Car Association (CPCA).

In April, China's passenger car retail sales were 1.63 million units, up 55.5 percent year-on-year and up 2.5 percent from March.

From May 1 to 14, China's passenger car retail sales were 706,000 units, up 55 percent year-on-year and up 24 percent from the same period last month, according to data released yesterday by the CPCA.

China NEV retail up 101% YoY in May 1-14, CPCA data show

The post Price competition in China auto industry poised to ease in May, analysts say appeared first on CnEVPost.

For more articles, please visit CnEVPost.

Categories
China Earnings Earnings Preview Electric eMobility eV Insights XPeng

XPeng Q1 earnings preview: Counting down to G6

XPeng's financial performance in the first quarter and its outlook for the second quarter will be weak, though the company may see a turnaround after the launch of G6, according to Edison Yu's team.

XPeng Q1 earnings preview: Counting down to G6-CnEVPost

(Image credit: CnEVPost)

XPeng (NYSE: XPEV) will report its unaudited financial results for the first quarter on May 24 before the US markets open. As usual, Deutsche Bank analyst Edison Yu's team provided their preview.

XPeng's performance will be weak in the first quarter and the outlook for the second quarter is likely to be subdued, but a turnaround in the second half of this year may be in the cards after the launch of the new SUV G6, according to a research note sent to investors today.

First quarter earnings

Previously released data showed that XPeng delivered 18,230 vehicles in the first quarter, slightly above the lower end of the guidance range of 18,000 to 19,000 vehicles.

The company's previous revenue guidance for the first quarter was RMB 4 billion to RMB 4.2 billion, a decrease of about 43.7 percent to 46.3 percent year on year.

XPeng sales have been weak since the second half of last year, with deliveries of just 5,218 units in January. It rebounded to 7,079 units in April, essentially flat from March.

Yu's team expects XPeng to report revenue of RMB 4.04 billion and adjusted earnings per share of RMB -2.52 for the first quarter.

The team expects XPeng's gross margin to be 5.0 percent and vehicle margin to be 0.4 percent in the first quarter, or down 530 basis points sequentially, as price cuts and promotions hurt margins.

This compares to the current consensus analyst estimates of RMB 4.24 billion, 6.1 percent and RMB -2.09, respectively, in a Bloomberg survey.

Subdued second quarter

Yu's team believes that XPeng deliveries are likely to be subdued in the second quarter as the G9 has struggled to gain order flow and supply constraints have hampered P7i deliveries.

G9 sales have been below 1,000 units for the past three months, and a summer price cut is likely, the team said.

XPeng management has said that orders for the P7i have increased unexpectedly and will increase more meaningfully in June and beyond. As a result, Yu's team expects XPeng to guide for low-mid 20,000 range second-quarter deliveries.

Deliveries of the upcoming G6 will begin in late June and the model will not make a significant contribution in the second quarter, according to the team.

G6 is the swing factor

In the company's fourth-quarter earnings call on March 17, XPeng management said the G6 will be officially launched and delivered by the end of the second quarter, with a price range of RMB 200,000 ($28,590) to RMB 300,000.

XPeng's monthly sales target for the G6 is 2-3 times that of the P7, He Xiaopeng, the company's chairman and CEO, said during the call.

XPeng unveiled a new architecture called SEPA (Smart Electric Platform Architecture) 2.0 at a technology conference in Shanghai on April 16, saying the G6 will be the first model built on the architecture.

The architecture will shorten the development cycle of future models by 20 percent and optimize development efficiency significantly. Interchangeability and interoperability of common and modular components between new models will reach 80 percent, enabling XPeng to meet diverse customer needs at an optimized cost, it said at the time.

Yu's team believes that the G6 will need to be successful for XPeng to be truly relevant again in the marketplace.

On a relative basis, XPeng management sees the G6 selling 2-3 times as many units as the P7, which means at least more than 5,000 units per month, according to Yu's team.

"Our view is XPeng will price G6 below Model Y in hopes of attracting consumers with its sleeker design and newer interior," the team wrote.

With the increased production of the G6, XPeng management believes total monthly deliveries could reach 15,000 units at some point in the third quarter.

"This seems achievable and we model XPeng reaching this level in Sep with potentially some help from a midcycle P5 face-lift ('P5i')," the team said.

($1 = RMB 6.9959)

XPeng G6 debuts at Shanghai auto show

The post XPeng Q1 earnings preview: Counting down to G6 appeared first on CnEVPost.

For more articles, please visit CnEVPost.