Xpeng Motors Stock Rises after Pricing Its G6 SUV Below Tesla Model Y
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Xpeng Motors stock (NYSE: XPEV) is trading over 14% higher in US price action today after the company priced its G6 SUV about 20% lower than Tesla Model Y.
The car is based on Xpeng Motors’ new production platform called SEPA2.0 (Smart Electric Platform Architecture) which the company unveiled in April.
While launching the platform, XPEV had said, that it “will shorten future models’ R&D cycle by 20%, significantly optimizing R&D efficiency” and help it lower vehicle costs.
The company has priced the G6 SUV between 209,900 yuan to 276,900 yuan and customer deliveries would begin next month.
In comparison, Tesla Model Y starts at 263,900 yuan in China after multiple price cuts over the last year.
China is the second-largest market for Tesla
China is the second largest market for Tesla while it is the biggest market for the company’s Model Y. The model was incidentally the best-selling car globally in the first quarter, after excluding pickups.
It was no mean feat for Tesla as for the first time ever an all-electric car was the bestselling model globally. Together, the Model Y and Model 3 account for over 95% of Tesla’s deliveries.
Xpeng Motors launches new SUV priced below Tesla Model Y
In his prepared remarks, XPEV CEO He Xiaopeng said, “XPENG G6 embodies our unwavering commitment to technology innovation and reaffirms our mission to lead the mobility transformation.”
He added, “We believe that our forward-looking technology roadmap and vision for making innovative technology accessible to the mass market firmly position XPENG as an industry trendsetter and leader in customer satisfaction.”
G6 to be fitted with Xpeng Motors’ ADAS
The G6 SUV would be equipped with Xpeng Motors’ Advanced Driver Assistance System. Earlier this month, the company received permission to expand its autonomous driving to Beijing also.
It currently offers the service in four major Chinese cities and aspires to expand the service to all major Chinese cities by the end of 2024.
Baidu also has robotaxi operations in some Chinese cities but Tesla does not have the permission to offer its autonomous driving in Chinese cities, apparently over spying concerns.
EV price war escalates
Meanwhile, Xpeng Motors pricing its G6 considerably below Tesla Model Y might only escalate the price war. Notably, XPEV cut car prices earlier this year also following Tesla’s price cut. In the US, Ford also lowered its Mach E prices after Tesla’s price cut,
Even NIO, which earlier this year denied that it would join the price war, lowered car prices earlier this month.
It meanwhile remains to be seen how much profit Xpeng Motors makes by selling G6. The company is otherwise struggling with profitability and its losses swelled to 2.34 billion yuan in the first quarter of 2023 as compared to 1.7 billion yuan in the corresponding quarter last year.
Xpeng Motors is posting losses
The company’s gross margin plummeted to a mere 1.7% in the quarter as compared to 12.2% in the corresponding quarter last year.
Also, its vehicle margin came in at -2.5% as compared to 10.4% in the corresponding quarter last year.
Notably, Xpeng Motors delivered only 18,230 vehicles in the first quarter of 2023 which took a toll on its financial performance.
Its deliveries have been below 10,000 in all five months this year. Xpeng Motors expects its growth to rebound in the back half of 2023 and said that monthly deliveries should be around 15,000 in the third quarter and 20,000 in the fourth quarter.
The company expects to post positive operating cash flows in the fourth quarter. It ended March with total cash and cash equivalents of $4.97 billion.
Tesla has industry-leading margins
Tesla has set a 2023 production guidance of 1.8 million which its CEO Elon Musk said can rise to 2 million in the best case.
The price war has taken a toll on Tesla’s margins though and its operating margins fell to 11.4% in the first quarter as compared to 19.2% in the corresponding quarter last year. That said, the company’s margins are still among the highest in the industry.
Analysts on Xpeng Motors’ G6 SUV
Analysts meanwhile seem bullish on Xpeng Motors G6 SUV and Hanyang Wang, an analyst at 86Research Ltd said, “We believe that the G6 will become the best-selling model in Xpeng’s history.”
Wang added, “As a comparable model for the G6, we anticipate Tesla’s Model Y will soon experience another round of price reduction in China, which will slightly impact on Tesla’s vehicle margin in the second half of this year.”
Citigroup analysts also believe that G6 is attractively priced and said, “We do admit the G6 pricing strategy created a unique product segment of BEV (battery electric vehicle) SUV at the 200,000-230,000 yuan range, which attracts customers wanting an entry level mid-sized BEV SUV but cannot afford a Tesla model-Y or Xpeng P7i.”
Musk believes Chinese companies are tough competitors
On multiple occasions, Musk has praised China’s manufacturing ecosystem and EV companies.
Last month, Musk termed China-based EV maker BYD “highly competitive.” In 2011, the billionaire had laughed at the possibility of BYD as a competitor to Tesla.
During Tesla’s Q4 2022 earnings call, Musk said, “we have a lot of respect for the car companies in China. They are the most competitive in the world. That is our experience.”
He added, “They work the hardest and they work the smartest. And so, if I were to guess, probably some company out of China is the most likely to be second to Tesla.”
Previously also the billionaire praised Chinese workers for burning the 3 a.m. oil” while criticizing American workers for “trying to avoid going to work at all.”
With Xpeng Motors pricing its G6 SUV below Tesla, all eyes would be on the Elon Musk-run company’s pricing strategy as the company has been quite dynamic with the pricing over the last few months and adjusts prices based on real-time demand and supply.
