XPeng: Achieving a Record-High Gross Margin, Can It Spread Its Wings and Become a "Mighty Roc"?
XPeng Motors (XPEV.US) released its Q2 2025 earnings report after the Hong Kong stock market closed and before the US stock market opened on August 19, 2025, Beijing time. XPeng's Q2 earnings report showed good performance, and its gross profit margin also reached a record high:
1) The gross profit margin of vehicle sales reached a record high: The gross profit margin of vehicle sales this quarter increased by 4 percentage points quarter-on-quarter to 14.3%, significantly higher than the market expectation of 11.4%.
The main reason for the significant quarter-on-quarter increase in the gross profit margin of vehicle sales this quarter lies in the quarter-on-quarter increase in the unit price of vehicle sales due to the improvement of the vehicle model structure, as well as XPeng's continuously proven ability to reduce supply chain costs since Q4 last year, combined with the release of the scale effect.
2) The revenue was slightly lower than expected, mainly due to the quarter-on-quarter decline in other revenues this quarter: XPeng's total revenue this quarter was 18.3 billion yuan, slightly lower than the market expectation of 18.6 billion yuan. This was mainly due to the decrease in the recognized licensing revenue in other revenues this quarter, which pulled down the revenue and gross profit margin of other revenues. However, the vehicle sales revenue was basically in line with expectations.
3) The adjusted operating loss this quarter was slightly higher than expected, still mainly due to the better-than-expected gross profit margin: The operating loss under Non-GAAP this quarter was -840 million yuan, better than the market expectation of -910 million yuan. Although the R & D expenses in the three major expense items were higher than expected, they were offset by the better-than-expected gross profit margin.
In terms of the three major expense items, XPeng is still increasing its investment in intelligentization. XPeng's self-developed "Turing" AI chip has been mass-produced and installed in vehicles, and there will be extended-range models of the Kunpeng system launched in the second half of the year. However, XPeng can still control its R & D expenses at a relatively low level compared with other new car - making forces, indicating that XPeng's R & D efficiency is still very high.
Dolphin Research's view:
Overall, judging from the Q2 performance itself, XPeng delivered a fairly good report card. The total revenue was 18.3 billion yuan, slightly lower than the market expectation of 18.6 billion yuan, mainly due to the quarter-on-quarter decline in service and other revenues this quarter, which was caused by the decline in the recognized revenue from technical R & D service fees this quarter.
In terms of the key vehicle sales performance, the unit price of vehicle sales this quarter was in line with the market expectation, but the gross profit margin of vehicle sales was significantly higher than the market expectation, increasing by 4 percentage points quarter-on-quarter to 14.3%, higher than the market expectation of 11.4%.
The main reasons for the higher-than-expected gross profit margin of vehicle sales this quarter are:
① In the vehicle model structure this quarter, the proportion of high - priced models (such as the redesigned G6/G9/X9) increased by 17 percentage points quarter-on-quarter, while the proportion of the low - priced Mona M03 decreased by 12 percentage points quarter-on-quarter.
② The quarter-on-quarter increase in sales volume this quarter, and the release of the scale effect led to a decline in the cost per vehicle after amortization.
③ XPeng's continuous cost reduction in the supply chain: Since Q4 last year, XPeng's ability to reduce supply chain costs has improved rapidly. This quarter, XPeng continued to demonstrate its strong cost - reduction ability, driving the quarter-on-quarter increase in the gross profit margin of vehicle sales, which laid the foundation for XPeng to continuously create high - cost - performance products in the future.
However, in terms of the expectations for Q3, XPeng's revenue and sales volume guidance are both lower than the market expectations. The sales volume guidance for Q3 is 113,000 - 118,000 units, implying an average monthly delivery of 38,000 - 40,000 units in August and September. Since XPeng's new P7 is expected to be launched in August, such a lower - than - expected sales volume guidance may trigger the market's concern about the sales volume of XPeng's new P7.
Currently, the market expects XPeng's sales volume in 2025 to be 450,000 units, corresponding to a P/S multiple of 1.6 - 1.7 times in 2025. The valuation is at a relatively reasonable level. The pricing of the new P7 and the two extended - range models G9 and X9 MPV in Q4 are the main sources of the expected difference. Currently, the market's expectations for the sales volume of the new P7 and the extended - range models are not high.
① The pricing of the new P7 will be the key factor determining the sales volume:
The current main point of market competition is whether the new P7 can achieve explosive sales, and the pricing of the P7 is the most crucial influencing factor.
The market expects that since the new P7 is a model that prioritizes high - end pricing and brand building rather than sales volume, the market expects the pricing to be about 250,000 - 300,000 yuan. Therefore, the market's expected sales volume of this model is not high. If the pricing of this model is better than expected and leads to explosive sales, it will be a catalyst for the upward movement of the stock price.
② XPeng's potential in extended - range models may be underestimated:
If the extended - range versions of the G9 and X9 MPV can achieve explosive sales, XPeng will start the "one - vehicle, dual - capabilities" model, and the stock price still has good upward potential.
The following is the main text
I. XPeng's gross profit margin of vehicle sales performed very well, mainly due to the improvement of the vehicle model structure and strong cost - reduction ability
Since XPeng's Q2 sales volume has been announced, when this earnings report was released, investors were still more concerned about the revenue and gross profit margin of the automotive business. The automotive gross profit margin in Q2 performed very well, increasing by 4 percentage points quarter-on-quarter to 14.3%, far exceeding the market expectation of 11.4% and also setting a new historical high!
Looking specifically at the economics per vehicle:
a) The average price per vehicle: The unit price of vehicle sales increased quarter-on-quarter due to the improvement of the sales structure
The unit price of vehicle sales this quarter was 164,000 yuan, an increase of 11,000 yuan from 153,000 yuan in the previous quarter. This was mainly due to the improvement of the vehicle model structure:
① The improvement of the vehicle model structure:
In the vehicle model structure this quarter, the proportion of high - priced models (such as the redesigned G6/G9/X9) increased by 17 percentage points quarter-on-quarter, while the proportion of the low - priced Mona M03 decreased by 12 percentage points quarter-on-quarter.
② The quarter-on-quarter increase in the proportion of overseas sales:
XPeng's overseas sales volume in Q2 was 11,000 units, accounting for 10.7% in the vehicle model structure, an increase of 2.6 percentage points quarter-on-quarter, which also pulled up the overall unit price of vehicle sales to a certain extent.
b) The cost per vehicle: The scale effect + the company's strong cost - reduction ability led to reasonable control of the cost per vehicle
In Q2, the cost per vehicle of XPeng was 140,000 yuan. The strong control ability on the cost side was mainly due to:
① The release of the cost per vehicle after amortization: The sales volume this quarter increased by 10% quarter-on-quarter to 103,000 units. The scale effect was released, and the fixed amortized cost per vehicle decreased.
② XPeng's continuous cost reduction in the supply chain: Since Q4 last year, XPeng's ability to reduce supply chain costs has improved rapidly. This quarter, XPeng continued to demonstrate its strong cost - reduction ability, driving the quarter-on-quarter increase in the gross profit margin of vehicle sales, which laid the foundation for XPeng to continuously create high - cost - performance products in the future.
c) The gross profit per vehicle: It increased by 8,000 yuan quarter-on-quarter to 24,000 yuan
In Q2, XPeng's gross profit per vehicle increased by 8,000 yuan quarter-on-quarter to 24,000 yuan, also setting a new historical high! The gross profit margin of vehicle sales also increased from 10.5% in Q1 to 14.3% in Q2 due to the quarter-on-quarter improvement of the vehicle model structure and XPeng's continuous strong cost - reduction ability in the supply chain.
II. The sales volume and revenue guidance for Q3 were slightly lower than expected
a) The target for vehicle sales volume in Q3: 113,000 - 118,000 units, slightly lower than the market expectation of 119,000 units
The sales volume guidance for Q3 is 113,000 - 118,000 units, implying an average monthly sales volume of 38,000 - 41,000 units in August and September, but slightly lower than the market expectation of 119,000 units. Currently, since XPeng's new P7 will be launched in Q3 (expected to be launched in August), the main point of market competition is whether the new P7 can achieve explosive sales, and the pricing of the P7 is the most crucial influencing factor.
b) The unit price expectation implied by the revenue guidance is still increasing quarter-on-quarter
The revenue guidance for Q3 is 19.6 - 21 billion yuan, implying that the unit price of vehicle sales is about 169,000 yuan, a quarter-on-quarter increase of 5,000 yuan, showing a trend of continued marginal improvement. It is expected to be driven by the quarter-on-quarter increase in the proportion of the two higher - priced models, the new P7 and G7.
Looking forward to the second half of the year, XPeng will launch the new P7 in August, and the G9/X9 Kunpeng series will be successively released and launched in Q4, which is expected to drive up the unit price and gross profit margin. Dolphin Research expects XPeng to maintain the break - even point in Q4.
III. The overall gross profit margin was better than expected, mainly because the gross profit margin of automotive revenue reached a new high!
XPeng achieved a total revenue of 18.3 billion yuan in Q2, slightly lower than the market expectation of 18.6 billion yuan. This was mainly due to the quarter-on-quarter decline in the service and other business revenues, but the automotive business still achieved better - than - expected performance.
a) Automotive sales business: The automotive gross profit margin reached a new high
This quarter, due to the improvement of the vehicle model structure, which led to the quarter-on-quarter increase in the unit price of vehicle sales, and the release of the scale effect, the automotive gross profit margin increased by 4 percentage points quarter-on-quarter to 14.3%, also setting a new historical high!
b) Service and other businesses: The decline in the revenue from technical R & D services led to the decline in the gross profit margin
The revenue of the service and other businesses this quarter was 1.39 billion yuan, slightly lower than the market expectation of 1.58 billion yuan. This was mainly due to the decline in the recognized revenue from technical R & D services this quarter. Since this business is basically a pure gross profit business, the gross profit margin of the service and other businesses declined from 66% in the previous quarter to 54% this quarter.
IV. The control of the three major expenses was relatively reasonable, and R & D expenses were still increasing for intelligentization
XPeng Motors positions intelligentization as its core competitiveness, which means it is destined to continuously increase R & D investment in intelligentization to form and strengthen its advantages.
1) The R & D expenses were 2.2 billion yuan, slightly higher than the market expectation of 2.08 billion yuan
Judging from the situation this quarter, XPeng's R & D expenses were 2.2 billion yuan, slightly higher than the market expectation of 2.08 billion yuan. This was mainly because XPeng is still increasing its investment in intelligentization. XPeng's self - developed "Turing" AI chip has been mass