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Briefing Aug 3, 2020 04:14 pm EqualOcean

Xpeng Delivers a Record High 1641 P7's in July

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Updated 13 hours ago ·

Xpeng Receives CNY 4 Billion from Guangzhou GET Investment

Xpeng announced that it had reached an agreement with Guangzhou GET Investment, a wholly-owned investment company of Guangzhou Economic and Technological Development Zone, under which GET will provide a CNY 4 billion funding. The Cooperation Agreement marks another milestone achievement in Xpeng’s advancement in manufacturing expansion and puts the Company’s leadership position at the forefront of the EV market. In addition to its wholly-owned plant in Zhaoqing, Guangdong province, which has an annual production capacity of 100,000 units, XPeng’s new Smart EV Manufacturing Base in Guangzhou will significantly expand the Company’s production capacity and accelerate XPeng’s momentum to achieve its goals in innovation, technological advancement and growth. “We are very excited to be selected as a key player in the Guangzhou Economic and Technological Development Zone,” said He Xiaopeng, Chairman and Chief Executive Officer of XPeng. “With the strong support from the Guangzhou government, we are confident we will execute on our strategic growth initiatives and deliver the highest quality products and services to meet our customers’ needs.” Also, Guangzhou GET Investment agreed to make an investment of CNY 1 billion in a PRC entity to be designated by Guangdong Xiaopeng by the end of March 2021. Guangzhou GET Investment also reserved previously approximately CNY 0.5 billion for participation in securities offerings by Xpeng, and roughly half of the amount is still available for additional investments in Xpeng before the end of August 2022. Besides, Xpeng’s Guangzhou Smart Manufacturing Base is planned to be completed and put into production by the end of 2022 and has a smart car manufacturing base with five process workshops for stamping, welding, painting, final assembly, and packing, which will be used for the research and development of its new models, vehicle production and sales. Simultaneously, the EV-maker has formed a full chain of investment, R&D, production, and sales in the Guangzhou Development Zone, and has deployed the national investment and financing headquarters, smart travel and vehicle R&D and testing businesses. 

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Sep 26, 2020 09:30 am ·

Xpeng Ships First Batch of G3is to Europe

Xpeng officially started taking orders of the G3i models with a range of 520 kilometers in Norway from June this year, with prices starting at CNY 257360. Compared with the Xpeng G3i sold in the Chinese market, the Xpeng G3i sold to Norway has been adapted and optimized for the characteristics of both European and Norwegian local needs in terms of hardware and software, to comply with relevant regulatory certification standards. Xia Heng, the co-founder of the firm, said, "the first European-spec super-long-range Xpeng G3 intelligent SUVs formally left for Norway today, which made us so proud. It indicates that Xpeng Motors has made headway in various links such as product R&D, intelligent manufacturing and market expansion, and its products have started to be tested by overseas consumers."  Xpeng's fellow Chinese counterpart NIO also recently outlined its plans to hit the European market. Li Bin, the founder and chairman of NIO, revealed: "We hope to enter some countries that welcome electric vehicles in the second half of 2021." Li Bin did mention entering the European market but did not disclose the specific country. At the same time, NIO plans to enter the world's major markets by 2023 or 2024. As with other Chinese products in many countries, people are still skeptical and the acceptance is still elusive among general consumers. Chinese products are known to have quality issues. Will Xpeng be able to change people's minds about their product? Well, we will have to wait and see.  

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Aug 29, 2020 09:10 am ·

Xpeng: Can a New Idea Challenge Tesla? – Initiate with Neutral

EO Auto is watching all shifts and changes in the EV industry. We have  been analyzing Xpeng’s upcoming IPO in the US, with reference to our analysis on other EV producers such as NIO, Li Auto and Tesla. Based on Xpeng’s narrative and performance in recent years, we have decided to initiate Xpeng coverage with a neutral rating. Future P7 Sales Can be Crucial Xpeng’s first model – the G3 – has undergone a rollercoaster in its sales record. The peaks and troughs in G3’s sales numbers indicate that its sales are highly dependent on promotions and changes in government subsidies. However, it should also be noted that Xpeng’s G3’s sales have so far underperformed its Chinese counterparts such as BYD, NIO and Li Auto. With over two years in the market and 147 direct and franchised stores spreading across major cities in China, the G3 is still not able to deliver a satisfying sales result.  Following the G3, the P7 is the second model Xpeng released in April 2020. This model was originally designed to compete with Tesla’s Model 3. However, so far, the attention-grabbing sales of P7 still lack visibility as it does not yet have a clear brand positioning. Meanwhile, by taking advantage of price subsidies for EV below CNY 300,000, Tesla’s Model 3 price reduction has attracted skyrocketing sales since lowering its price in May 2020 – the numbers jumped by 200% in May following the announcement. This shocking sales figure is partly driven by Tesla Model 3’s price reduction, but it also shows that the release of P7 has not been able to significantly shift consumers’ EV purchasing decisions. Coming off the underperformance in G3 sales and debut of P7, Xpeng may have a hard time meeting its expected 2Q delivery numbers.    Margin Outlook We think the gross margin is an important measure among EV manufacturers. While EV is a burgeoning business with almost guaranteed strong market expansion in the foreseeable future, companies are also burning large piles of cash to design their own EVs while maintaining all the necessary infrastructures – i.e. stores, charging stations – to remain competitive in the business. So, with such a high risk in play, we think sellers that attain positive gross margins have achieved a relatively sustainable profit-making model. On the contrary, a negative gross margin can reflect a lack of economy of scale.  As of now, only Tesla, Li Auto, and BYD have a positive or breakeven gross margin. In the case of Xpeng, its past margins have been – ~24% in FY 2019 – which is still distant from achieving this goal. In this aspect, two EV makers that standout are Tesla and Li Auto. Tesla’s margins have been  16.7%-- this was achieved through its cost optimization in components and localization of manufacturing processes. As for Li Auto, its positive margin from the start is driven by the low cost of producing hybrid EVs.  Compared to these two EV makers, Xpeng’s pure EV standpoint seems to leave the economy of scale and upstream optimization as the option to pursue profitability in gross sales.  For now, barriers for EV makers to convert to positive margins seem to grow higher as well. With a maturing Gigafactory in China, Tesla Model 3, which now starts at CNY 271,550, is achieving ~30% gross profit and has even more room for price reduction going forward. On the other hand, Xpeng’s P7, priced lower than Model 3 (starts at CNY 229,900), is already in negative gross margin territory. With Tesla’s growing capability to further reduce its MSRP, one can only imagine the pressure on Xpeng’s P7.  Long Term Battle in R&D  The idea of building smart EV has been the main narrative around Xpeng, and it is evident that it has incorporated advanced features such as in-car human-computer interaction, high-end chassis modulation to enhance the modern feel of its vehicles. These can be attractive points-- purchasing an EV with high-end and high quality features embedded at CNY 200,000 can seem to be a bargain. However, mixed consumer feedback so far on G3 and P7 suggested some design problems in both models and indicated that Xpeng’s R&D effort might be missing some points. For instance, although the making of P7 from an in-car intelligent system to high-end interior design is superior to that of Tesla Model 3, many car owners still prefer Tesla and purchase it at a premium compared to P7. Another concern regarding Xpeng’s R&D is its allocation of resources. Although Xpeng’s R&D spending is currently 95% of its total sales compared to Tesla’s 5.5% in FY 2019, it is still behind Tesla in the magnitude of R&D investment (USD 300.94/1343 for Xpeng/Tesla respectively in FY 2019). This can be crucial as the competition is dependent upon the magnitude of the R&D effort. In the past 3 years, Xpeng also devoted its R&D effort in both G3 and P7, two different types of vehicles with drastically different designs. In 2021, Xpeng is expected to release its third smart EV. This rate of new model release implies limited R&D resources given to each model, which we think in turn can lead to more design or quality issues and a lack of competitiveness in the future. Macro Environment Creates Opportunity and Uncertainty EV adoption is an irreversible trend in China, and the government is pushing for it with favorable policies. According to IHS Markit, the EV market will expand from 0.9 million units in 2019 to 4.2 million units in 2025, representing a 29% CAGR. Nevertheless, it is noticeable that many EV sales are relying on policies-- new rounds of government subsidies are often the sole driver for spurs in buying activities.  So, in the long term, establishing brand recognition is crucial for competition with government support fading away and real demand kicking in. Currently, Tesla is still the most mature and dominant player in the EV space, and we see that NIO has been successfully attacking the high-end EV market in China. In addition, traditional car manufacturers are also leveraging their brand names to gain access to the EV market, which can intensify the competition in the foreseeable future. At this point, we see that Xpeng is still lacking brand recognition among buyers. Without an inherent customer base as traditional car sellers, the challenge for Xpeng to stay in the game can be enormous.  Valuation Considering the discussion above, we initiate coverage on Xpeng with a neutral recommendation and December 2020 Price Target of USD 18.7 per share.  We used a blend of a 2024-based Price-to-Sales (PS), and EV/EBITDAP-based analysis. The summary is shown below. The PS approach uses a target multiple of 5.0x 2024 revenue, guided by the average of 2.0x multiple of 2024 consensus revenue that NIO (NIO:NYSE) currently trades, the 1.1x multiple of 2022 consensus revenue at which BYD (002594:SZ) currently trades, and the 35.5x multiple of 2024 consensus revenue at which TSLA (TSLA:NASDAQ) currently trades. Following a similar approach, we use a target multiple of 33.1x EV/EBITDAP, and we used both ratios to arrive at our TP. We note the key downside risks to our valuation include: 1) sooner-than-expected tipping point of battery tech which gives BEV makers a strong price advantage; 2) lower-than-expected new car model roll-out which dragging top-line; 3) continuation of underperformance in sales due to price reduction of other brands, such as Tesla. Upside risks include 1) better-than-expected delivery of P7 and the upcoming new model in 2021.

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Aug 29, 2020 09:00 am ·

Xpeng Debuts on NYSE with Shares Up 56%

The third Chinese EV maker to get listed in the US Xpeng saw its shares jump 54% on its debut on the New York Stock Exchange on Thursday. Shares of Xpeng, which counts Chinese e-commerce giants Alibaba and Xiaomi among its backers, opened at USD 23.10 per ADS, up from the raised offer price of USD 15 per ADS. Xpeng’s founder and CEO He Xiaopeng, told Reuters that the company will focus on cars priced between CNY 150,000 (USD 21,804) to CNY 300,000, for the world's largest auto market. He also revealed that Xpeng will use the funds for research and development, and to expand sales. Xpeng got listed successfully on the New York Stock Exchange on August  27, becoming the third NEV manufacturer from China after NIO and Li Auto. Right before the listing the share prices of Tesla, NIO and Li Auto all hit record highs, with Tesla’s market cap surpassing USD 400 billion, NIO at USD 24 billion and LI Auto approaching USD 20 billion. This was a sign of optimism for the then to-be listed firm but at the same time it showed the strength of its competitors.  In China, Xpeng, NIO and Li Auto are known as ‘Xin Zao Che San Ju you’ (Chinese: 新造车三巨头) translating to the ‘NEV big three’ because of their similar backgrounds and rapid development of NEV manufacturing. Among the ‘big three,’ Xpeng has the highest financing amount and the most cash reserves at the time of listing, making it the richest company among its Chinese-listed peers.  The road ahead has huge uncertainties, and this listing is a key step for Xpeng to resolve these uncertainties. For Xpeng the number of sales for its newest model P7 will be an important factor of its success in the world's biggest auto market. We’ll have to wait and see if P7 will be able to put enough pressure on locally made Tesla model 3. When it went public, in June 2010, Tesla's issue price was about USD 17. Today, ten years later, it has risen to about USD 2,200 per share, which is equivalent to an increase of 129 times with a market cap of USD 400 billion. With a large amount of R&D investment, Xpeng’s P7 is undoubtedly a model with high product strength. On July 17 this year, Xpeng held P7 nationwide delivery ceremonies simultaneously in Beijing, Shanghai, Guangdong and Chengdu. After only half a month, P7 delivery reached 1,614 vehicles. If P7 can reach the level of monthly sales of around 2000 to 3000 units, that is, the current average monthly sales level of NIO ES6 and Li Auto’s Li ONE, it means that Xpeng has the same market recognition as its fellow Chinese peers. On the contrary, if the P7 does not meet the expected sales, it will put pressure on the development of Xpeng's third production car. Other than that, pressure also comes from Tesla's Model 3. The domestically produced Model 3 already has the capacity to sell 10,000 units a month."

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Aug 27, 2020 09:00 am ·

Exclusive: Tesla's First Delivery Center in Shanghai to be Put into Use

Since opening its first experience center in Beijing Parkview Green in 2013, Tesla has opened more than 70 experience centers and exhibition halls in many cities in mainland China in the past seven years. In order to meet the surging car purchase demand, Tesla revealed to EO Automobile that it will establish its first delivery center in Shanghai (hereinafter referred to as "Pudong Delivery Center") in Pudong. The Pudong Delivery Center will be renovated at the end of August and will be officially handed over to Tesla. It is expected to be put into use in early September. The Pudong Delivery Center is located on Jinxing Road, Waigaoqiao Free Trade Zone, about 70km away from Tesla's Shanghai Lingang Super Factory. The surrounding transportation is convenient, and it is only 300m away from the South Metro Station of Waigaoqiao Free Trade Zone of Shanghai Metro Line 6. According to staff, the Pudong Delivery Center once belonged to the Shanghai Free Trade Zone Parallel Imported Cars, which was mainly used as a second-hand car trading showroom, and was later rented by Tesla. The delivery center exhibition hall has a total area of ​​4,512 square meters and is divided into 2 floors. The first floor mainly provides functions such as delivery and display, and the second floor is the office area. According to the plan, the Pudong Delivery Center will mainly deliver Model 3 and Model Y models produced by the Shanghai Super Factory in the future, with a daily throughput of 200-300 vehicles. Following the Pudong delivery center, Tesla will build another large delivery center in Puxi, Shanghai in the future. Relying on the Pudong Delivery Center, Tesla on the one hand can provide users with a complete service integrating test drive, car ordering, delivery and post-sales, on the other hand, it can better spread the advanced concepts of new energy vehicles. In the green area outside the delivery center, Tesla plans to establish a small car theme park for the surrounding citizens to enjoy and visit.

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Aug 27, 2020 09:00 am ·

Xpeng Plans to Price USD 15 per ADS for NYSE IPO

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Updated 13 hours ago · Jiemian.com

DiDi to Increase 100,000 Shared Bike in Beijing

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Sep 28, 2020 10:11 am ·

GAC Trumpchi M8 Debuts at Beijing Auto Show

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Sep 26, 2020 09:30 am ·

Li Auto’s New Car Plan Leaked

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Sep 25, 2020 09:30 am ·

SAIC Volkswagen to Build MEB NEV Plant

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