An EV company that people like to talk about from China is Xpeng.
Anyway, I have been researching their vehicles as best I can and going through their financials,
so I would just report to you all my findings, and let's see if this company really has
the signs to be a successful EV. I thought it might also be prudent
to compare them with Tesla as best we can too, to help get some idea.
In Q3 XPeng delivered 25,000 vehicles annualized that is obviously over 100,000 a year.
Which does make them a major contender in the EV industry, and these are solely BEV, no hybrid.
Now back in September the XPeng P7 was the number 10 selling EV
in China. But 2 of the top 10 are plug in hybrids, and the top one is the Wuling,
which I dont consider a serious a EV, at least not for exporting. Therefore The P7 is really #7,
and wasn't even too far off the 2 BEVs above that, in other words, if they continue to ramp,
I see no reason they shouldn't be the #1 selling BEV in China, behind Tesla.
The Xpeng P7 is a reasonably nice looking vehicle, inside and out, although I pretty sure they drew
some design inspiration from the Lucid Air. They were smart enough to go with a large
widescreen in the interior. It surprises me how few manufacturers do this, like Ford or even NIO.
On their web site, XPeng are much more open about their specifications,
when compared to BYD, which is going to make it much easier for me to research.
And obviously Tesla do too, so let's compare them.
The P7 standard range has a 0 to 60 time of 6.7 secs, which actually isn't too bad,
I think most people can live with that, compared to the BYD Han, at over 8 secs, which isn't going
to be sufficient for many drivers. And sure the Tesla is at 5.8 secs, and used to be 5.3 secs.
The P7 has a top speed of 100 mph, ok not great, but really how often to most drivers go that fast?
I am sure plenty of people can live with that. The Tesla hits 140 mph.
The Tesla weighs under 3600 lbs, the P7 over 4200 lbs. That's quite a bit of a difference,
and would effect handling as a result. Think of how much effort Tesla go to in reducing weight,
let alone almost 700 lbs. This is meant to be a video about XPeng, but
I think it is also good to appreciate how much further ahead Tesla is, and truly what an amazing
job they have done. Remember all those extra items inside that car that are heavier, also cost money.
Granted we could say that Tesla may use lighter weight parts that cost more,
on the other hand, the lightest part, is no part.
Alright, what about battery size then. Alright we have Tesla with a 57 kWh battery
and the P7 with a 60 kWh battery. So fairly similar in size. They both use LFP batteries.
XPeng claim the range for the P7 is 480 km, NEDC. Convert that to EPA miles
and it comes in at 208 miles of range. Compared with 272 miles for the Tesla.
Wow, Telsa have a slightly smaller battery but produce a lot more range. Every mile of
range becomes more difficult to achieve too, so to be that far ahead is really something.
Sure it's Teslas motors, power trains, software and everything helping, but also the addition 700
lbs too, that's got to have an impact too. But still XPeng is hitting over 200 miles of range.
This is with LFP batteries too, which means you can charge them to 100% all the time.
Although bear in mind in colder climates. or winters, this range will suffer somewhat too.
Alright, and the last major factor, but certainly not the least important the price.
There is a smart version and premium version, we will just take the cheaper smart version
at 229,900 Yuan, which is cheaper than the Model 3 at 255,652 Yuan. These prices include subsidies.
Although of course there is a waiting list on the Tesla, until early next year. I am not sure
if the XPeng has a waiting list. And I am not even sure there is much point in comparing price. Tesla
could still raise their prices if they wanted and still fall below the market clearing price
where supply means demand. Likewise Tesla could also undercut XPeng, and still make a profit.
Perhaps instead we should compare how much each of them cost.
Let's guess the Model 3 is at 30% margin in China.
We will need to add back in the subsidies then at 11,088 Yuan. XPeng claim a 14.4% margin.
That then gives us a cost of 186,718 Yuan for Tesla and a cost of 206,286 Yuan for the XPeng.
So Tesla are still able to make their vehicle cheaper than XPeng,
and customers are willing to pay more for it.
Alright let's explore more of XPeng's financials. They generated 5.7B Yuan in revenue equating to a
gross profit of 820m Yuan. Which is $128m to give you some idea.
This resulted in an overall loss of 1.6 billion Yuan. They have working capital of 37 billion
Yuan, current assets minus current liabilities. However their OPEX has risen from 1.9 billion
to 2.8 billion Yuan since last quarter, and likely will continue to rise. Therefore I would give them
approximately about 3 more years maximum at their current burn rate, until they run out of capital.
But perhaps they will be able to continue improving their margins and perhaps the burn
rate will reduce somewhat. But if you want some comparison, Tesla was at this gross margin at
around mid 2018. It took Tesla a couple more years to start making net profits. And that was Tesla.
The P7 is at a run rate of 7,500, the highest run rate after Tesla in China is at just over 8,000.
Everyone seems to struggle to even hit 10,000 units a month, let alone Elon's definition of
volume production at 20,000. They might be at a point now, where it could be tough to
see more growth, and it might start to round off. Oh and bear in mind even Tesla nearly went broke
going through production hell, i.e. ramping to volume production. No one, I repeat,
no one else has managed volume production for an EV, let alone doing it with a profit.
And no other BEV company has yet to make a net profit. I think this is still being
under looked. Elon has told us so many times, just how difficult this is.
In other words they have about that long to try and turn their company into a net profit,
or reach volume production. Also a lot of people seem to think the CCP will help them, but if
anything it sounds like the current subsidies they are receiving are likely to shrink or stop,
as they have already been dwindling. Some people think some of the Chinese EVs,
will become nationalized, but then that would like mean they will really hold back innovation.
I can't see them having the funds like BYD did to start their own in-house batteries
to further reduce costs in increase margins.
Anyway, this would not be a company that I am willing to invest. For the
record I was a shareholder in NIO at one stage.
They are no competitor to Tesla clearly, and this is them on their
home turf. They sell their P7 for 46,000 Euros in Norway. And $49,000 in the US.
And as for FSD, then of XPeng is going down the Lidar route too. Therefore
they have all this additional R & D, that will further affect their OPEX, and reduce margins.
I wish I could drive an XPeng myself, the reviews I have seen are pretty impressive,
the car drives well, looks good, has a lot of tech, in fact it would seem its closer to a
computer on wheels than the legacy EVs, who are simply electrifying their old style of vehicle,
this is under rated. But it is falling short on range. But their range could be enough
for a lot of markets, but I don't think the US will be one of them, especially if they don't
adopt Tesla charging network. Put it this way, with that low a range, I would say it would be
tough in the US without Tesla's charging network. But there are plenty of other markets for them.
On the other hand the US are investing $7.5 billion into chargers,
and maybe US consumers will eventually decide that 200 miles is a sufficient range in a vehicle.
But despite their impressive growth lately, that are nearing the limitations that every EV seems
to face, and likely not going to hit volume production or get through production hell.
If they can't achieve this, then selling 100,000 units a year of the P7, is hardly going to have
any major impact. Especially if you consider how many of them would be exported to the US. Anyway,
I still think it's an important auto company to keep any eye on. They still seem to be
doing a lot of things better than legacy autos. And moving so much faster than Lucid or Rivian.
Thanks