Xpeng Motors: It is expected that Q3 single-month delivery volume will reach a record high. Currently, China is the only company that supports the implementation of end-to-end autonomous driving technology.

Xpeng Motors today released its second quarter financial report for 2024:

• Total revenue was 8.11 billion yuan, a year-on-year increase of 60.2% and a month-on-month increase of 23.9%.
• Net loss was 1.28 billion yuan, compared with a net loss of 2.80 billion yuan in the same period last year and a net loss of 1.37 billion yuan in the previous quarter.
• Not in accordance with U.S. GAAP, the adjusted net loss was 1.22 billion yuan, compared with a net loss of 2.67 billion yuan in the same period last year and a net loss of 1.41 billion yuan in the previous quarter.

After the financial report was released, Xpeng Motors co-founder, chairman and CEO He Xiaopeng, vice chairman and president Gu Hongdi, vice president of finance Charles Zhang, and vice president of finance and accounting Wu Jiaming attended the subsequent earnings conference call. Interpret financial report highlights and answer analysts' questions.

The following is the full text of the financial report meeting:

Morgan Stanley analyst Tim Hsiao: First of all, congratulations on the strong delivery growth in the third quarter supported by the new car cycle.

I have two questions. The first question is about new car sales. According to the third quarter guidance given by Xpeng Motors, due to the contribution of Xpeng M03 and the increase in exports in September, single-month delivery can return to the previous high. Taking into account the follow-up support of Xpeng P7+, the single-month delivery in the fourth quarter ( delivery volume) may even challenge the 30,000 level.

However, we see that while new and old platforms are alternating, management believes that compared with several models launched in the past, how will Xpeng Motors consolidate the delivery volume of the next new models? How can the delivery volume of new models maintain its growth momentum over a longer period of time? Avoid a situation like last year, when new car sales slowed down significantly after the honeymoon period, or sales fluctuated in pulses due to promotional activities.

He Xiaopeng:In fact, this problem is also one of our most important problems (that need to be solved). There is a calligraphy table in my office with four words written on it, which is called "Steady and far-reaching". These four words are also what Xpeng Motors has been asking of itself starting from the second half of this year. To be honest, it is very difficult to achieve "stable and long-term development" in a rapidly changing market environment. From a certain perspective, I think the impact next year, including the impact on gasoline vehicles, will be even greater than this year.

So we have done a lot of things in this regard, including changes in supply chain management, platformization of the overall supply chain, and our requirements for production quality. Whether it is Xpeng's MONA or Xpeng P7+, we have improved it to Very high level production quality requirements. We are moving in the direction of "steady and long-term development" for monthly OTAs, micro-remodels that constantly change according to customer experience in each short period of time, annual models, and the entire marketing system and channel system. At the same time, in our current rolling 12-month production, supply and sales plan, we have taken into account competition, our new cars, and the issues in the process of alternation and overlap between different models of our new cars and facelifts.

So, under the current circumstances, we will definitely have more confidence than last year and the year before. We hope that we can follow our plan (execution) every quarter in the future, be able to achieve more accurate (execution) of the entire plan, and achieve the overall logic of "stable and long-term development".

Gu Hongdi:Let me add a few more points.

First of all, I agree with what you said. When we gave our delivery guidance for the third quarter, we expected delivery volume to be around 20,000 units per month. In other words, Monthly delivery volume in the third quarter will reach a record high. There are many driving factors behind achieving this goal, including the fact that we have seen the market respond very well to MONA, which makes us very excited. Considering the current order trends and the preparations just mentioned by Mr. He (He Xiaopeng), we are very confident that Xiaopeng MONA will be delivered in the first month. Starting in September, Xpeng MONA will become the fastest-delivering electric vehicle model among all electric vehicle startups. We are confident that MONA can set industry records.

One more thing I want to emphasize is that our delivery volume growth also includes significant growth in delivery volume in overseas markets. As you can see, our product delivery volume in overseas markets exceeded 10% in the second quarter, and we expect that overseas delivery volume in the third quarter may reach around 15%. The performance of overseas markets also means that our orders are more diverse. This gives us more confidence that the delivery targets we set for the third and fourth quarters can be achieved.

Morgan Stanley analyst Tim Hsiao: My second question is about intelligent driving, also known as "intelligent driving". Just now, Mr. Xiaopeng also mentioned Xpeng Motors’ large-scale investment in AI end-to-end large-scale models and smart driving. This has allowed Xpeng Motors to show very impressive performance in smart driving capabilities and full nationwide opening in the past period. score. But if we look at it from the perspective of business returns, when does management expect that the upper limit of Xpeng Motors’ intelligent driving capabilities will become the threshold for its peers? When can Xpeng Motors' smart driving capabilities be further accelerated and transformed into a driving force for Xpeng Motors' new car sales? In addition, can the management provide us with some observation indicators, such as user mileage penetration rate or point-to-point implementation as Xiaopeng mentioned in the briefing?

He Xiaopeng: After the 5.2 version is pushed, we can see some very good data changes.

First, core indicators such as usage penetration rate and mileage penetration rate of all users have a significant increase of at least 20%. Second, in the past, some of our stores were unable to test drive Xpeng’s intelligent assisted driving system XNGP in the city. Now all our stores can test drive, which can help users better understand our differentiated advantages.

Judging from my perspective, today only Xpeng supports the implementation of end-to-end autonomous driving in China, and other companies are only claiming to support it later. I just mentioned that there are two challenges in this.

The first challenge is that the upper limit is increased end-to-end, but how to keep the lower limit? This requires a lot of work. This has also caused Xpeng to make considerable adjustments as a whole, and we need to ensure that the lower limit is high enough. The second challenge is that, for example, in the past we had to test in various places; but now that we have achieved end-to-end, we can look at the trend and realize that driving in every place is like a local experienced driver, just like An experienced local driver is driving. But it will also bring challenges. Maybe the original "rule-based + AI small model" logic will do better in some areas. Therefore, today’s (intelligent driving) capabilities in some areas will even have a certain degree of playback.

However, judging from the trend, I still firmly believe that this year will be a turning point. By some time next year, I think Xpeng's autonomous driving assistance will be several to ten times better than it is now. By that time, I believe (Xpeng’s autonomous driving) will bring about huge changes in sales from a commercial perspective. At the same time, combined with the cost competitiveness advantage of our new-generation hardware platform launched by Xpeng P7+ at the end of this year, I believe that more customers will be able to experience more advanced automation at an affordable cost. I believe these will bring us a huge turning point next year.

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