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Xpeng Motors looks to ramp up production and emerge unscathed from global chip shortage

Written by AJ Cortese Published on     3 mins read

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Xpeng Motors’ doesn’t expect the global chip shortage to disrupt its production, providing an opportunity to close the gap on its rivals.

Smart electric vehicle (EV) producer Xpeng Motors (NYSE: XPEV) generated total revenues of RMB 2.85 billion (USD 437 million) for the fourth quarter of 2020, exceeding market expectations of USD 404.6 million, according to the company’s latest financial results announced on Monday.

Total vehicle deliveries reached 12,964 in the latest quarter, a steep increase from just 3,218 vehicles in the same period of 2019, and a 51.1% year-over-year (YoY) increase from the third quarter of 2020.

For the full year of 2020, Guangzhou-based Xpeng Motors delivered 27,041 vehicles, which still lags behind domestic rivals Nio and Li Auto, which shipped 43,728 and 32,624 cars respectively.

Xpeng Motors achieved a positive gross margin for the first time, 4.6% for the full year of 2020, compared to a negative 24% in 2019, marking a major milestone in the firm’s path towards profitability. The company’s gross margin also improved to 7.4% in the December quarter from 4.6 in the third quarter of 2020.

Major players in China’s EV market are all rapidly trying to scale their businesses, and Xpeng is no exception. The firm is ramping up production at its factory in Zhaoqing, Guangdong province, which was opened last July, with the goal of churning out 10,000 vehicles per month from the facility by the end of this year. Xpeng also began construction on a new manufacturing base in Guangzhou and expects to begin production by the third quarter of 2022.

Last week Shanghai-based EV rival Nio warned that the global semiconductor shortage could impact its production, while Xpeng remains more optimistic.

“We are monitoring very closely as to whether [the chip shortage] will impact our supply chain overall. In the foreseeable period, we don’t see any impact but that’s actually something we focus on a lot. Given that our volume is relatively small compared to some large original equipment manufacturers (OEMs) who are facing a much bigger crisis, we are more nimble to address this issue,” Xpeng Motors’ president Brian Gu told investors on the earnings call.

Xpeng shipped over 15,000 P7 EVs in 2020. Source: Xpeng Motors

In addition to being fully electrified, Xpeng presents its cars as intelligent vehicles with advanced software at their core. In late January, Xpeng Motors released a new version of the P7’s operating system, the Xmart OS 2.5.0, to augment the driver’s user experience, along with XPIILOT 3.0 which is the company’s proprietary autonomous driving system.

XPILOT 3.0 includes the firm’s assisted highway solution NGP (Navigation Guided Pilot), which has been activated in 20% of all P7 models delivered as of the end of February.

“With the continuous advancement in our autonomous driving capabilities, we are confident that autonomous driving features will be a key consideration of our customers’ purchasing decision,” Xpeng’s CEO He Xiaopeng told investors on the earnings call. The company plans to double its research and development headcount by the end of the year.

For the first quarter of 2021, the company forecasted RMB 2.6 billion (USD 400 million) in revenue and 12,500 vehicle deliveries.

Xpeng Motors’ share price fell by 4.03% to USD 26.92 in Monday trading following the earnings announcement.

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