Smart and Sustainable Electric Mobility
While demand for Li Auto's vehicles remains robust, investor concerns about competition have increased, particularly around Huawei-backed Aito, said Deutsche Bank analyst Edison Yu's team.
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Nio's gross margin will be under pressure due to lower deliveries, but stronger execution is starting to show up, which could help vehicle margins recover in the second half, according to Deutsche Bank.
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Deutsche Bank expects Xpeng to report mixed results for the second quarter, while the outlook for the third and fourth quarters will show meaningful sequential improvement driven by a strong G6 order book.
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Deutsche Bank expects Li Auto's management to guide third-quarter deliveries at around 100,000 units, driven by strong demand for the Li L7 and Li L8.
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Gotion's earnings preview implies it will post a net profit of RMB 7,439 to RMB 124.4 million in the second quarter, a year-on-year increase of 129.46 percent to 283.68 percent.
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BYD's earnings preview implies that its net profit for the second quarter will be RMB 6.37 billion to RMB 7.57 billion, up 128.56 percent to 171.62 percent year-on-year.
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Deutsche Bank expects NIO to report soft results for the first quarter, with downside risk to margins, though some relief in on the way.
NIO (NYSE: NIO) will report first-quarter unaudited financial results on Friday, June 9, before the US markets open. As usual, Deutsche Bank analyst Edison Yu's team provided their preview.
"NIO is suffering from weaker-than-expected demand and is facing its greatest adversity since nearly going bankrupt in 2020," the team said in a research note sent to investors today titled "Struggling along for another quarter."
The team expects NIO to report soft results in the first quarter, with downside risk to margins, and a very weak outlook for sales, and margins in the second quarter.
Previous data showed that NIO delivered 31,041 vehicles in the first quarter, slightly above the lower end of the guidance range of 31,000 to 33,000 vehicles.
NIO's previous revenue guidance for the first quarter was between RMB 10.93 billion and RMB 11.54 billion, implying year-on-year growth of about 10.2 percent to 16.5 percent.
Yu's team expects NIO to report revenue of RMB 10.9 billion in the first quarter, with a gross margin of 2.5 percent and adjusted earnings per share of RMB -3.07.
This compares to the current analyst consensus estimates of RMB 11.7 billion, 7.4 percent, and RMB -2.66, respectively, in a Bloomberg survey.
Looking ahead, Yu's team expects NIO to deliver 21,000-23,000 units in the second quarter.
NIO delivered only 12,813 units in April and May combined due to very low demand for the ET7 and ES7, the team noted.
The EV maker delivered 6,155 vehicles in May, down 7.55 percent from 6,658 in April, according to data released on June 1.
While production and supply chain issues appear to be resolved, underlying demand for NIO's premium BEVs has been disappointing as customers opt for gasoline models from German luxury carmakers BMW, Mercedes-Benz, Audi and Li Auto EREVs, Yu's team said.
The team attributed NIO's recent weak sales to 3 main factors. The following is from their research note:
1. NIO's pricing is the highest amongst the start-ups and premium BEV demand has been generally weak across the board.
2. The premium segment appears to be electrifying more slowly which may be counter-intuitive to those outside China. Based on our analysis of the premium SUV market (>300k RMB), the BEV mix is only 12% YTD, compared with PHEV (includes EREV) at 18%, leaving 70% for ICE.
This compares with the overall market that is 21% BEV and 10% PHEV, showing customer preferences are quite different depending on the sub-segment.
Our read is the EREV value position is resonating with a much broader audience than anticipated which Li Auto has done a very effective job at maximizing.
3. We believe NIO's brand appeal has hit a wall of sorts as it is struggling to get momentum outside of Shanghai (and surrounding provinces) and also beyond finance/tech social circles.
To illustrate this, we look at the performance of NIO's best-selling ET5. Nearly 40% of sales mix comes from this region and ET5 sells quite poorly in the south despite in theory having the broadest appeal amongst NIO's offerings.
Moreover, based on our channel checks, affluent older customers simply are not buying into the brand (yet) and still prefer traditional BBA cars.
Management will need to figure out ways to augment the appeal of its unique services such as battery swapping. For existing customers, the usage is actually quite high, having set records during recent holiday (69k swaps in one day or ~20% of car parc).
NIO officially launched the new ES6 -- the best-selling NIO SUV in history -- in China on May 24, and deliveries began the same night.
In addition to the new ES6, NIO will also begin deliveries of the new ES8 and the ET5 Touring, a derivative of the ET5 sedan, this month.
NIO's deliveries in June will get a boost from a full month of new ES6 deliveries and partial contributions from the ET5 Touring, Yu's team said.
The new ES6 starts at RMB 368,000, higher than expected, as many potential buyers are comparing it to the Li Auto Li L7, which starts at RMB 319,800, the team said.
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For the ET5 Touring, the team expects pricing to be at RMB 335,000 - RMB 345,000, slightly higher than the regular ET5.
NIO management aims to capitalize on the success of the Zeekr 001, which proves there is a sizable local market for luxury sport EV wagons, the team said.
Yu's team expects NIO to see only a minimal improvement on vehicle margins in the second quarter.
"While lower battery input costs should help by at least 1-2% sequentially along with phasing out of aggressive promotional activity on first-gen 866 models, this will be partially offset by lack of overhead absorption/higher D&A as overall volume in 2Q will be down materially compared with 1Q," the team wrote .
As sales improve in the second half of the year, auto margins should return to double digits, the team said.
On the operating cost side, with sales under so much pressure, Yu's team suspects NIO management may be forced to show some level of restraint.
"We are skeptical NIO can achieve 'core' breakeven in 4Q23 and overall breakeven in 2024," the team wrote.
Also, cash burn will intensify due to declining deliveries, similar to what XPeng is experiencing, the team said, adding that they suspect NIO management will roll back its previous RMB 10 billion capex outlook.
Notably, the team remains bullish on the company's prospects, despite many investors have lost patience after multiple sales and margin disappointments.
"We think the stock is already embedding in a very negative path forward and we reiterate NIO's longer-term strategy of having multiple brands, holistic charging infrastructure, and an aspirational ecosystem can still ultimately win out once the dust settles on the EV wars," The team wrote.
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XPeng's financial performance in the first quarter and its outlook for the second quarter will be weak, though the company may see a turnaround after the launch of G6, according to Edison Yu's team.
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XPeng (NYSE: XPEV) will report its unaudited financial results for the first quarter on May 24 before the US markets open. As usual, Deutsche Bank analyst Edison Yu's team provided their preview.
XPeng's performance will be weak in the first quarter and the outlook for the second quarter is likely to be subdued, but a turnaround in the second half of this year may be in the cards after the launch of the new SUV G6, according to a research note sent to investors today.
Previously released data showed that XPeng delivered 18,230 vehicles in the first quarter, slightly above the lower end of the guidance range of 18,000 to 19,000 vehicles.
The company's previous revenue guidance for the first quarter was RMB 4 billion to RMB 4.2 billion, a decrease of about 43.7 percent to 46.3 percent year on year.
XPeng sales have been weak since the second half of last year, with deliveries of just 5,218 units in January. It rebounded to 7,079 units in April, essentially flat from March.
Yu's team expects XPeng to report revenue of RMB 4.04 billion and adjusted earnings per share of RMB -2.52 for the first quarter.
The team expects XPeng's gross margin to be 5.0 percent and vehicle margin to be 0.4 percent in the first quarter, or down 530 basis points sequentially, as price cuts and promotions hurt margins.
This compares to the current consensus analyst estimates of RMB 4.24 billion, 6.1 percent and RMB -2.09, respectively, in a Bloomberg survey.
Yu's team believes that XPeng deliveries are likely to be subdued in the second quarter as the G9 has struggled to gain order flow and supply constraints have hampered P7i deliveries.
G9 sales have been below 1,000 units for the past three months, and a summer price cut is likely, the team said.
XPeng management has said that orders for the P7i have increased unexpectedly and will increase more meaningfully in June and beyond. As a result, Yu's team expects XPeng to guide for low-mid 20,000 range second-quarter deliveries.
Deliveries of the upcoming G6 will begin in late June and the model will not make a significant contribution in the second quarter, according to the team.
In the company's fourth-quarter earnings call on March 17, XPeng management said the G6 will be officially launched and delivered by the end of the second quarter, with a price range of RMB 200,000 ($28,590) to RMB 300,000.
XPeng's monthly sales target for the G6 is 2-3 times that of the P7, He Xiaopeng, the company's chairman and CEO, said during the call.
XPeng unveiled a new architecture called SEPA (Smart Electric Platform Architecture) 2.0 at a technology conference in Shanghai on April 16, saying the G6 will be the first model built on the architecture.
The architecture will shorten the development cycle of future models by 20 percent and optimize development efficiency significantly. Interchangeability and interoperability of common and modular components between new models will reach 80 percent, enabling XPeng to meet diverse customer needs at an optimized cost, it said at the time.
Yu's team believes that the G6 will need to be successful for XPeng to be truly relevant again in the marketplace.
On a relative basis, XPeng management sees the G6 selling 2-3 times as many units as the P7, which means at least more than 5,000 units per month, according to Yu's team.
"Our view is XPeng will price G6 below Model Y in hopes of attracting consumers with its sleeker design and newer interior," the team wrote.
With the increased production of the G6, XPeng management believes total monthly deliveries could reach 15,000 units at some point in the third quarter.
"This seems achievable and we model XPeng reaching this level in Sep with potentially some help from a midcycle P5 face-lift ('P5i')," the team said.
($1 = RMB 6.9959)
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"We expect generally soft results and a weak 1Q23 outlook due to challenging demand and pricing dynamics," Edison Yu's team said.
XPeng US | XPeng HK
XPeng (NYSE: XPEV) will report fourth-quarter earnings on Friday, and as usual, Deutsche Bank analyst Edison Yu's team provided their preview.
"We expect generally soft results and a weak 1Q23 outlook due to challenging demand and pricing dynamics," the team said in a research report sent to investors yesterday.
XPeng will report its unaudited financial results for the fourth quarter and fiscal 2022 on Friday, March 17, before the US markets open.
It delivered 22,204 vehicles in the fourth quarter, above the upper end of the guidance range of 20,000 to 21,000, but down 46.82 percent year-on-year and down 24.91 percent from the third quarter.
XPeng's previous revenue guidance for the fourth quarter was RMB 4.8 billion to RMB 5.1 billion, representing a year-on-year decrease of about 40.4 percent to 43.9 percent.
"We expect a soft quarter with deliveries already reported at 22,204, above management's guidance range (20,000-21,000), but with promotional activity hitting margins," Yu's team wrote.
The team expects XPeng to post revenue of RMB 5.4 billion yuan and a gross margin of 11.5 percent in the fourth quarter.
They expect XPeng's vehicle margin to be 8.5 percent in the fourth quarter, down 3.1 percentage points from the third quarter, and adjusted earnings per share of RMB -2.33.
The current analyst consensus in the Bloomberg survey is for revenue of RMB 5.7 billion, gross margin of 12.1 percent and adjusted EPS of RMB -2.25.
For the first quarter, Yu's team expects deliveries to be around 19,000-20,000 units and for gross margin to drop to single digits as price cuts take hold.
XPeng deliveries in January and February were 5,218 and 6,010 units respectively, for a cumulative total of 11,228 units. Insurance registration figures for the past two weeks suggest that the company did not see a significant improvement in deliveries in March.
The key to XPeng's relevance going forward is to win back market share, and that could take several quarters to achieve, which has created significant uncertainty this year, Yu's team said.
Demand for the company's flagship SUV, the G9, has clearly been disappointing, despite mostly positive reviews, the team said, adding that they expect XPeng to potentially make pricing or SKU adjustments to the SUV in the coming months.
XPeng's new P7i sedan should help with order volume, but there won't be materially beneficial until the second quarter, the team said.
Most importantly, XPeng's upcoming Tesla Model Y competitor, the G6, needs to reach at least 5,000 units per month by the end of the year to be considered a success, the team said.
The team now expects XPeng to be on track to deliver 145,000 vehicles in 2023, a 10,000-unit downward revision from earlier, taking into account the decline in G9 sales.
If XPeng's sales continue to be weak, its management may need to get creative to improve its capacity utilization, Yu's team said, adding that the easiest way to do that would be to sign some large fleet deals.
That may be hard in China, considering BYD and GAC have stronger positions in the taxi and ride-sharing segment, but XPeng recently signed deals with some local car rental companies to buy its P7 sedan, the team noted.
XPeng entered into a strategic partnership with local car rental company eHi Car Services on July 19, 2022, and delivered the first few hundred cars to the latter.
On January 9 this year, XPeng signed agreements with car rental company China Auto Rental and Geely's travel service platform Xiaolinggou Travel Technology, and completed the delivery of the first XPeng P7 vehicles in Ningbo, Zhejiang province.
In addition, XPeng has restarted its expansion efforts in Europe, where large fleet deals could make sense due to the region's high percentage of corporate fleets and low availability of cheap BEV options, Yu's team said.
"We note BYD has an agreement with SIXT for 100,000 EVs and XPeng's vehicles fall into a similar price point. BYD also just announced a 5,000 unit agreement with UK's Octopus EV," the team wrote.
Another option is to partner more deeply with traditional OEMs on EVs and robotaxis, which could come in the form of equity investments or strategic alliances, according to the team.
XPeng offering discounts to clear P7 inventory, facelift to launch next week, report says
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Deutsche Bank believes the true test for Li Auto will come in the second half of the year.
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