XPEV Pops, LI Drops After Earnings: XPeng’s Cost Cuts Outshine Li Auto Discounts

• XPeng reported an improvement in its gross and vehicle margins in Q1, while Li Auto reported a decline during the same period.
• XPeng’s gross margin rose to 20.6% in the first quarter from 15.6% a year earlier, while vehicle margin improved to 12.1% from 10.5% over the same period.
• Li Auto’s gross margin fell to 7.9% in the first quarter from 20.5% a year earlier, while vehicle margin dropped to 6.1% from 19.8% over the same period.

XPeng Inc.’s (XPEV) American Depository Receipts rose in Thursday’s pre-market trade while its competitor, Li Auto Inc.’s (LI) shares fell after the two Chinese automakers reported their first-quarter (Q1) results before the opening bell.

Both XPeng and Li Auto reported a double-digit year-on-year decline in revenue, while still exceeding Wall Street expectations.

XPeng reported a wider quarterly loss in Q1, while Li Auto swung to a loss after reporting a profit during the same period a year ago.

XPeng ADRs were up more than 3% in Thursday’s pre-market trade, while Li Auto’s shares were down over 3%.

What’s Fueling The Divergence In XPEV, LI Today?

Despite reporting a loss and revenue decline in Q1, XPEV and LI are moving in the opposite direction in Thursday’s pre-market session.

One of the reasons behind this is the gross and vehicle margins reported by the two automakers. While XPeng reported an improvement in its gross margins as well as vehicle margins in Q1, Li Auto reported a decline during this period.

XPeng’s gross margins rose to 20.6% in Q1 from 15.6% during the same period a year ago. Its vehicle margins also edged up to 12.1% from 10.5% in this period.

In contrast, Li Auto’s gross margins fell to 7.9% in Q1 from 20.5% during the year-ago period. Its vehicle margins stood at 6.1% during the quarter, down from 19.8% during the same period a year ago.

What Worked For XPeng But Not For Li?

XPeng stated that the year-over-year improvement in its vehicle margins was driven mainly by lower costs and a more favorable product mix. However, on a sequential basis, its margins contracted, with the company citing higher per-vehicle expenses tied to rising memory chip and battery costs as the primary reason.

Li Auto stated that its year-on-year and sequential decline in margins during Q1 was primarily due to a different product mix and a fall in vehicle margins due to discounts.

“Our first-quarter gross margin reflected our user-centric measures related to Li i6 deliveries, as well as raw material price fluctuations and our model refresh cycle,” said Li Auto CFO Tie Li.

XPEV, LI’s Q1 At A Glance

XPeng reported revenue of RMB13.03 billion ($1.89 billion) in Q1, declining nearly 18% year-on-year. Its net loss per share stood at RMB1.87, up from RMB0.7 during the year-ago period.

XPeng reported a net loss of RMB1.78 billion in Q1, compared to RMB0.66 billion during the year-ago period.

Wall Street analysts estimated Q1 revenue of RMB12.86 billion, according to Fiscal.ai data.

Li Auto reported revenue of RMB23 billion ($3.3 billion) during Q1, down 11% year-on-year and higher than an estimate of RMB21.82 billion.

Li Auto reported a net loss of RMB2.3 billion in Q1, compared to a net profit of RMB646.6 million during the year-ago period.

XPeng’s deliveries during Q1 shrank significantly by 33% in Q1, down to 62,682 units from 94,008 units in the year-ago period. Li Auto’s deliveries edged up by 2.5% YoY to 95,142 units from 92,864 units a year ago.

XPEV ADR is down 23% year-to-date, while LI stock is down 9%. The Robo Global Robotics and Automation Index ETF (ROBO) is up 56% over the past 12 months, while the S&P Kensho New Economies Composite ETF (KOMP) is up 44%.

The Avantis Emerging Markets Equity ETF (AVEM) is up 49% during this period.

$1 = RMB6.78

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