
XPeng Inc.
5/24/2023
Gentlemen, thank you for standing by for the first quarter of 2023 earnings conference call for Xpeng Inc. At this time, all participants are in listen-only mode. After management's remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Alex Shee, Head of Investor Relations of the company. Please go ahead, Alex.
Thank you. Hello, everyone, and welcome to Xpeng's first quarter 2023 earnings conference call. Our financial and operating results were issued by our newswire services early today and available online. You can also view the earnings press release by visiting the IR section of our website at ir.xpeng.com. Participants on today's call from our management will include co-founder, chairman, and CEO, Mr. He Xiaopeng, vice chairman and president, Dr. Brian Gu, Vice President of Finance, Mr. Dennis Liu, Vice President of Corporate Finance and Investments, Mr. Charles Zhang, and myself. Management will begin with the prepared remarks and the call will conclude with a Q&A session. A webcast replay of this conference call will be available on the IR section of our website. Before we continue, please note that today's discussion will contain four looking statements made under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the relevant public filings of the company as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that EXPON's earnings press release and this conference call include disclosure of unaudited GAF financial measures as well as unaudited non-GAF financial measures. EXPON's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. I will now turn the call over to our co-founder, chairman, and CEO, Mr. He Xiaopeng. Please go ahead.
Some of them have completed the task of the previous stage with us from 0 to 1. They have left, and more of them have come up from the inside and the outside with a strong connection and full of entrepreneurial spirit. And in a very short time, about more than a quarter of an hour, they have completed the simulation period and achieved considerable changes. This is something that makes me very excited. I saw that all the students have changed themselves, started a second business, and started to be more passionate and determined. We will adjust the direction of innovation to the cost. And we believe that from the third quarter, Xiaopeng will re-enter the market Hi, everyone.
Beginning in the first quarter of 2023, facing future competition, XPeng has centered around change. With that in mind, I took action to make considerable changes to XPeng's business plan, organizational structure, and management team. As a result, some senior management who completed their mission on our journey from zero to one have stepped down, Nonetheless, more new talents full of energy and entrepreneurial passion have quickly stepped up and taken on leadership positions through both internal promotions and external recruitment. I'm excited to see these new team members have fit in well in a short amount of time and make remarkable changes. I'm also very encouraged to see the passion and determination of all XBank employees to change as if today were XBank's day one as we shifted the focus about innovation towards cost, efficiency, and customers. It is very hard for the manufacturing industry to reverse the declining trend and set off a virtuous cycle, but we managed to start the reform with ourselves and rebuild the fundamentals of the company. Compared with competitors in industry, Such a reform makes me confident that we'll be able to perform well consistently in each battle and create a virtuous product sales cycle, boost team morale, increase customer satisfaction, and raise our brand reputation from the third quarter of 2023.
In the past four months, in order to face the challenges of the macroeconomic economy and the more intense competition in the entire industry, we have a certain proportion of return on investment per month. In March, the high-end version of our new product, the PCI, exceeded our expectations due to the performance of the three-round version. As a result, the original product was not able to meet the demand. Compared to the original product, the SKU of the PCI is more sophisticated and the listing rhythm is more tight. From June this year, we will work with our supplier partners to greatly improve the production of the PCI. We will work hard to make this product outstanding.
In the face of macroeconomic challenges and more intense competition, we achieved month-on-month growth of new orders for the past four months. More excitingly, order intake for the higher-end MCM versions of our new P7i model, which was just launched in March, has exceeded our expectations. The original production capacity we planned was not enough to cover demand. Compared with the previous P7 model, the P7i offers more streamlined SKU specifications with a more efficient go-to-market strategy. Starting from June, we'll work with supplier partners to significantly ramp up the production of P7i's components. and aim to accelerate deliveries of this popular new model with its aesthetically pleasing style design and distinguishing smart features, further driving P7i's sales growth.
在我们首款采用SEPA 2.0的扶摇技术架构的新车型G6, 在今年4月份的上海车展首次亮相, 并且成为人气非常高的流量焦点。 G6 is not only stylish and stylish, but also has the best space in the same level, which is fully guaranteed for the experience of riding. At the same time, G6 is equipped with the most advanced 800V high-pressure and 3C fast charging battery in the industry. So in ultra-long battery life, I especially want to point out that G6's battery life is up to 755 kilometers, and it has the advantage of being unique in the same level on ultra-high fuel efficiency and ultra-fast charging. More importantly, G6 is the youngest XNGP in the delivery and support industry. I am very happy to share with you that G6's media market price has already started last week. The media generally returns to G6 in the self-driving market, with 800V high-pressure fast charge on the first-person platform and other electric vehicles in the market. This obviously opens up a gap in the generation, similar to the logic of replacing a 3G mobile phone with a 2G mobile phone. In the next month, that is, in June, G6 will officially launch. In July, we will start to scale up and quickly climb. 我们相信G6将会成为中国20到30万元新能源SUV市场最受瞩目的热销爆款, 带动小棚汽车的总交互量在三季度的同比和环比都取得远高于行业的震荡数, 形成我们在战略跟组织调整的第一个销量观点。 那么在四季度我们还计划推出一款7座纯电MPV, 我们内部命名为X9, 以及推出现有车型定义更清晰和更丰富的配置的款式, 那我们的销量再上一个台阶。
Our latest production model debuted at the Shanghai Auto Show in April, the G6, which was our first production model that is built on XPeng's next-generation technology architecture platform, SEPA 2.0, or Fuyao in Chinese. Its debut was met with remarkable enthusiasm from attendees at the expo. The G6 features a stylish, aesthetic design designed and best-in-class interior space, ensuring a comfortable ride. Fully equipped with a world-class 800-volt high-voltage SIC platform and a 3C fast-charging battery, the G6 is uniquely positioned within its segment, boasting ultra-long range as high as 755 kilometers, ultra-high energy efficiency, and ultra-fast charging. More importantly... Upon market delivery, the G6 will be equipped with XNGP, the industry's leading ADAS. I'm pleased to share with you that G6 test drives by Media began last week. The feedback from Media is that G6 is well ahead of other EV models by one generation in terms of ADAS capabilities and its 800-volt platform with faster charging and lower energy consumption. which is in analogy to the 3G technology replacing 2G in mobile phones. The G6 will be officially launched in June and begin mass deliveries in July, accompanied by a fast ramp-up. We believe the G6 will emerge as one of the best-selling models in China's NEV SUV market segment within the 200,000 RMB to 300,000 RMB price range. We expect this model to drive substantial growth in XPeng's third quarter delivery volume and significantly outperform the industry's growth in both year-over-year and quarter-over-quarter terms. This will mark the first inflection point in our sales growth following our strategic and organizational adjustment. Additionally, in the fourth quarter, we plan to launch a seven-seat electric MPV model, which we call X9 internally. and roll out more clearly defined configurations for existing models in order to further boost our sales growth.
The Max version of the car was fully delivered to the city's NGP and XNGP customers. Customer feedback makes us very excited. After the delivery, the first month's travel smoothness is more than 60%. So it's a price that users can use every day. I am also used to using XNGP every day for the first time. It gives me the feeling that the self-support driving is able to make driving easier. In these three cities' small and medium-sized stores, after we launched the test drive of the city's XNGP, In April, the order for the P7i and T9 Max versions of these three levels significantly increased by more than 50%. We plan to officially launch the NGP 2.0 in June, which is next month. The NGP 2.0 is rewritten using the X-NGP framework, which is five times more than the original version. We use the most complex city scene training algorithm to re-implement the high-speed scene to achieve a downward blow. We hope to make the high-speed NGP 2.0 very similar to L4, We also firmly believe that 2023 will mark an inflection point in the development of smart technologies for EV and a starting point of smart technologies' widespread user adoption. We expect most of our potential customers
to recognize value by 2024 to 2025. At the end of March this year, we rolled out our CDNGP on max stream of multiple models for customers in Guangzhou, Shenzhen, and Shanghai via OTA update. The customer feedback we received has been inspiring. In the first month following the OTA rollout, CDNGP's mileage penetration rate reached over 60% and has become an assisting driver for users' daily commute. For the first time, I personally have also gotten used to driving with X-NGP every day. It made me feel much more relaxed to drive. City NGP test drives are already available at all Xpeng stores in Guangzhou, Shenzhen, and Shanghai. In April, the percentage of order of the max stream of our P7i and G9 models in a total order of P79 and G9 increased substantially to more than 50%. We also plan to start the rollout of Highway NGP 2.0 in June. Highway NGP 2.0 was developed based on the framework of XNGP, so its code increased by five times compared to the original version. Equipped with algorithms trained in complex urban driving scenarios, Highway NGP 2.0 is able to offer highway driver assistance experience close to that of L4, meaning high efficiency, consistent performance, no getting stuck, no disturbance, and also no intention to take over. By the end of 2023, the number of manual takeovers per 1,000 kilometers when using our Highway NGP is expected to be reduced to one or fewer.
In the end of the third quarter of this year, we will continue to open XNGP without high-resolution maps in cities without high-resolution maps in China. This will be the first scale mass production of Chinese city without high-resolution maps. From our actual situation, the difficulty of mass production of XNGP without high-resolution maps is almost 100 times the difficulty of high-resolution maps in NGP. This is an important analysis of team technology and data ability. but it is worth it. Once the user's actual experience is completed, it will be greatly improved. At present, our XMGP has reached a new market level. Based on a large number of programming data and a strong training of behind-the-scenes data, we hope to upgrade OTAs once every quarter, and try to increase the experience of XMGP's annual price increase. We will continue to improve security and availability, and gradually increase the number of By the end of the third quarter this year, we'll begin nationwide rollout of our XNGP across more cities with our high-definition map coverage.
This will be the first time for the mass production of city NGP or equivalent without HD map in China. Based on our experience, the mass production of city NGP in cities without high definition map coverage is a hundred times more difficult than the mass production of highway NGP with high definition map. It sets a new benchmark for our R&D teams technologies and data capabilities. However, it's well worth it because it will considerably enhance our user experience once we achieve it. At present, our ex-NGP has the driving abilities equivalent to a novice driver. Moving forward and supported by the large-scale data set generated in urban driving environment and strong back-end closed-loop data training systems, we expect to introduce quarterly OTA updates for XNGP, which we expect to enrich its driving experience by one year each time, offering increased safety and generalization capability, and incorporate some capabilities of large language model, or LLM, into XNGP. I firmly believe that as we continue to make breakthroughs in XNGP's experience, scenario coverage, and ownership costs, Based on data in the three cities we have launched, sales of the max stream of our models with XMGP will grow significantly.
Good design really matters to young consumers.
So since the end of last year, I have been directly managing the styling and design department and put more efforts and resources into improving our design capabilities. Recently, we invited several talented designers with experience in designing top-selling models to join XPeng. We also created healthy competition between excellent external design teams and our in-house design teams to generate even more creative design ideas for new models. In addition to that, the LLM also is very helpful to our design improvement. I believe these changes will enable our new models and future facelift versions to be equipped with market-leading interior and exterior styling and design.
Since the first quarter, our marketing and service system has undergone a huge change under the leadership of President Wang Fengying and the team. The company has begun to use internal and external customers To move forward quickly in the logic of the center by increasing the user experience of sales and service all over the world and also increasing the response speed of the user demand One of the things that we are very happy to report is that one of the core indicators that we are concerned about is that NPS continues to stabilize and improve from the beginning of this year to April and has returned to the leading level of the industry in April of this year
Since the first quarter, our sales, marketing, and service capabilities have been upgraded in a concerted effort under the leadership of our president, Wang Fengying, and also the whole company is making external and internal customer-centric transformation quickly. By enhancing our customer experience throughout the entire sales and service process and speeding up our response to customer demand, since early this year through April, we have achieved consecutive improvement in our MPS one of our core customer satisfaction indicators. Now, as of April, our MPS has rebounded to Tier 1 level in the industry.
Looking ahead into the next quarter,
Our top priority will remain cleanly focused on rapid acceleration of our sales and EV market share growth. We have already implemented measures to flatten the management structure across our sales organization and establish a middle office that is more efficient and can more quickly respond to requests that come from the front line. The next step will be to take a more selective approach on our existing sales network in order to strengthen the competitiveness of our channels as a whole. In addition to increasing operational efficiency across our Tier 1 and Tier 2 cities' sales network, we'll also introduce more high-quality dealers in Tier 3 and Tier 4 cities to bolster our product roadmap and sales targets over the next few years in the 150,000 RMB to 350,000 RMB price range market segment. 技术的变革跟激烈竞争将会在未来三年。
In the next three years, we will maintain the lead in technology. At the same time, we are continuing to introduce new models that are more competitive in terms of cost and have the same use and operation experience. The number of new models in our industry will cover the price range of 150,000 to 350,000 yuan, and will share the power, electric motor, self-winding, and self-driving platform. We hope that the development cycle of our new models will continue to increase by 20% in the current situation. We hope that the total utilization rate of the structural part of the zero-by-zero can reach up to 80%.
We believe the automotive industry landscape will be transformed by technology innovations and fierce competitions over the next three years. In addition to great product proposition and new technology, the key to success also lies in cost reduction to the greatest extent and efficient involvement in R&D and operations. Our next-generation technology architecture, SEPA 2.0, boasts powerful competitive strengths in R&D efficiency and technology innovation. With G6 mass production, the SEPA 2.0 architecture represents platform-based technology capabilities that we've built through consistent, intensive R&D efforts over the past five years, which will strengthen our leadership in technology over the next three years. We are rolling out new products that offer more competitive cost and consistent customer experience based on SEPA 2.0. The new models in our R&D pipeline, which covers the 150,000 RMB to 350,000 RMB price segment and a variety of new car types, will be built on a suite of shared technology platforms spanning power chain system, electronic and Electrical architecture, smart cabins, and ADAS will shorten future models' R&D cycle by 20%, and up to 80% of architectural components will be compatible between different models, both of which enable XPeng to substantially reduce R&D spending on new models and BOM costs.
目前我們正在為明年底實現在MAX版本上實現25%降本的目標。 I believe that this time, amidst the intense change in the industry, I think that cost and efficiency, including hardware cost and software cost, including the efficiency of development and operation, We will improve the core competitiveness of China. Today, it is still a battle based on sales or scale, but in 2025, it will be a combination of scale, innovation, design, cost efficiency, quality, and even globalization.
Over the second half of 2023 through 2024 we are planning to map out a clear and practical plan to achieve our target of a 25% cost reduction by the end of 2024. And we expect to realize some benefits of cost reduction initiatives in product design and power chain and vehicle hardware as soon as this year. In this round of industry revolution, I believe that cost control both for hardware and software and efficiency enhancement for both operation and products will be among the core competitive edges to win the ultimate competition. Nowadays, the competition is mainly around volume or scale, but the next round of competition requires comprehensive competitiveness in scale, innovation, design, cost, efficiency, quality, and global markets, all of which are indispensable.
From the perspective of cash flow, we have accumulated more than 3.4 billion yuan in cash in the first quarter. In the future, I will further reduce it and focus on investing in customers' approval of the R&D, and build long-term competitive advantages through the platformization of technology. At the same time, we will optimize our organization and flow management, and further increase the operational efficiency of the entire company's flow. From July of this year, I believe that G6 and other new products In terms of our cash flow, our cash on hand at the end of the first quarter of 2023 amounted to over 34 billion RMB. I'll further simplify our operations
concentrate our R&D investment on what customers recognize and build our long-term competitive position by advancing our platform-based technology approach. At the same time, we'll continue to optimize our organizational structure and management process significantly to further improve our operating efficiency across the company. Beginning in July, with the mass delivery of G6, along with other new product launches that will feel a rapid sales growth, I expect our monthly deliveries to increase significantly in the third quarter compared with that in the second quarter. Furthermore, as our monthly delivery targets exceed 20,000 vehicles in the fourth quarter of 2023, I expect our cash flow generated from operations to turn positive accordingly. 最后我们预期2023年第二季度
Our total payment volume is about 21,000 to 22,000. The return rate is 15% to 21%. The income is expected to be about 45 to 47 billion yuan. From the amount of payment, from 2022, which is the third quarter of last year, Xiaofeng will have a challenge period of four consecutive quarters. But I always think that the crisis and the crisis are parallel. This also led us to think earlier about how to win the elimination game in 2025 and how to advance to the final game in 2027. 我们将通过真正的自我变革,更强有力的新产品跟渠道的布局, 在今年的三季度和四季度都获得大幅度的销量的环比的成长。 Now, moving to our guidance. We expect our total vehicle deliveries to be between 21,000 and 22,000 units in the second quarter of 2023, representing 15 to 21% quarter-over-quarter growth.
in the revenue to be between 4.5 and 4.7 billion RMB. From the third quarter of 2022, even though we underwent four consecutive quarters of pain in terms of deliveries, I always believed that in every challenge lies an opportunity. It prompted us to reflect earlier on how to win the knockout phase in 2025 and how to get into the semifinals in 2027. Drawing on our more competitive new products and more effective sales channels, we will achieve substantial sales volume growth on a sequential quarterly basis in the third and fourth quarters of 2023. Thank you, everyone.
With that, I'll now turn the call over to our VP of Finance, Mr. Dennis Liu,
to discuss our financial performance for the first quarter of 2023.
Thank you, Mr. He, and hello, everyone. Now I would like to provide a brief overview of our financial results for the first quarter of 2023. I will reference IMB only in my discussion tonight unless otherwise stated. Our total revenues were IMB 4.03 billion for the first quarter of 2023, a decrease of 45.9% year-over-year, and a decrease of 21.5 percent quarter-over-quarter. Revenues from vehicle sales were RMB 3.5 billion for the first quarter of 2023, a decrease of 49.8 percent year-over-year, and a decrease of 24.6 percent from the last quarter. The year-over-year and quarter-over-quarter decreases were mainly attributable to lower vehicle deliveries and discontinuation of new energy vehicle subsidies. Growth margin was 1.7 percent for the first quarter of 2023 compared with 12.2 percent for the same period of 2022 and 8.7 percent for the first quarter of 2022. Vehicle margin was minus 2.5 percent for the first quarter of 2023 compared with 10.4 percent for the same period of 2022 and 5.7 percent for the first quarter of 2022. The year-over-year and quarter-over-quarter decreases were mainly explained by increased sales promotions and the expiry of new energy vehicle subsidies mentioned above. R&D expenses for RMB 1.3 billion for the first quarter of 2023, representing an increase of 6.1% from RMB 1.2 billion for the same period of 2022 and an increase of 5.3% from RMB 1.2 billion for the first quarter of 2022. The year-over-year and quarter-over-quarter increases were mainly due to higher expenses relating to the development of new vehicle models. SG&A expenses were RMB 1.4 billion for the first quarter of 2023, representing a decrease of 15.5 percent from RMB 1.6 billion for the same period of 2022 and a decrease of 21 percent from RMB 1.8 billion for the first quarter of 2022. The year-over-year and quarter-over-quarter decreases were mainly due to lower commission paid to franchise stores and lower marketing and advertising expenses. As a result of foregoing, loss from operations was RMB 2.6 billion for the first quarter of 2023 compared with RMB 1.9 billion for the same period of 2022 and RMB 2.5 billion for the last quarter. Land loss was RMB 2.3 billion for the first quarter of 2023, compared with RMB 1.7 billion for the same period a year ago, and RMB 2.4 billion for the last quarter. As of March 31, 2023, our company had cash, cash equivalent, restricted cash, short-term investment, and time deposit in total of RMB 34.1 billion. To be mindful of the length of our earnings score, I will encourage listeners to refer to our earnings press release for more details on our first quarter financial results. This concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead.
Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your questions. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time. Management will respond and then feel free to follow up with your next questions. Today's first question comes from Tim South with Morgan Stanley. Please go ahead.
首先感谢管理层接受我的提问。 我这边有两个问题。 第一个是有关于这个价格策略。 因为我们也看到现在市场的这个价格竞争非常的激烈。 那竞争对手的定价也非常灵活。 所以我们应该怎么去考虑包含 G6以及后续车型的一个定价策略。 那也就有鉴于刚才小朋友也提到了嘛,就是... My first question is about the pricing strategy. How should we think about XFIN's price strategy for G6 and the upcoming models? Given the severe pricing competition, will XFIN tend to price the model more aggressively when bringing the model to the market to ensure the company can stay much ahead of peers in terms of price performance ratio? Especially, I think Mr. Ho just mentioned, the group will happily focus on evolving growth. Or the company would prefer to leave some room for a cheaper version to follow on after the volume has taken off in order to effectively respond to peers' pricing adjustment and better balance our near-term profitability? So that's my first question.