Summary of Key Points
On August 25th, Xpeng Motors' stock price on the Hong Kong Stock Exchange plummeted by more than 10%, with its total market value falling below HK$90 billion. The main reasons were the significantly expanded losses in its half-year report released the previous day (a net loss of HK$3.12 billion in the first half of the year, a year-on-year increase of 174%), as well as concerns raised among investors by He Xiaopeng's emphasis on expanding the robotics business during the financial report meeting. The financial report indicated a slowdown in Xpeng Motors' growth (revenue decreased by 3.8% year-on-year, and sales volume fell by 15.8%). Although there were positive aspects such as growth in services and overseas revenue, the high risks associated with the unprofitable robotics business and the instability of its core automotive business posed a major source of market panic.
Detailed Analysis
1. Half-Year Report Shows Poor Performance: Double-Digit Losses and Stagnant Growth
Xpeng Motors' results for the first half of the year were concerning for investors:
- Exponential Losses: The net loss amounted to HK$3.12 billion, nearly doubling from HK$1.14 billion in the same period last year. While losses are not uncommon among new entrants in the automotive industry, the rapid increase in losses is concerning—last year's annual loss was only HK$1.14 billion, but this year's half-year loss has already more than tripled.
- Stagnant Growth: Revenue was HK$32.78 billion, a year-on-year decrease of 3.8% (compared to a year-on-year growth rate of 132% last year); sales volume fell by 15.8%. As automotive sales are the main source of revenue, the decline in sales directly led to reduced income. Although services and other revenues (such as technology licensing and parts) increased by 67%, their scale is small and not sufficient to offset the losses.
- Misleading Gross Margin: The overall gross margin of over 20% seems good, but it is largely driven by the services business (with a gross margin of 71.4%). The gross margin from vehicle sales is actually not satisfactory, indicating that the company is not making much money from selling cars and is relying on technology and parts sales to cover its costs.
2. Robotics Business: Hype Around High Gross Margins, but Not Yet Profitable
He Xiaopeng presented the robotics business in a very positive light during the conference call, but investors were skeptical:
- Promising Advantages: He claimed that 85% of the robotics supply chain overlaps with that of the automotive industry (resulting in lower costs), and the gross margin for hardware is higher than that of the automotive sector (referencing Yushu Technology's 60% gross margin). Mass production is scheduled for the end of 2026, with deliveries expected in 2027.
- Hidden Issues: He did not provide clear details about how much will be sold, to whom, and how much profit will be generated—these are the key concerns for investors. Yushu Technology's stock price plummeted by 39% after its listing because the market realized that the demand for its products mainly comes from research institutions and universities, which cannot support a high market value. Xpeng's robotics business will also face significant short-term costs before it becomes profitable.
3. High Risks of Duplicating Efforts with Two Business Lines
The domestic new energy market is highly competitive, with many companies competing in the mid-to-high-end segment (around HK$100,000 to HK$300,000). Investing in robotics at this time is like diverting attention from the core business:
- Excessive R&D Expenses: R&D expenses in the first quarter of 2026 amounted to HK$2.91 billion, a year-on-year increase of 46.8%, accounting for 22.3% of total revenue (compared to 7.4% for NIO and 11.7% for Li Auto). High R&D costs can be detrimental when the automotive market is sluggish, exacerbating losses.
- Unstable Core Business: With declining sales and weak profitability, investing in robotics means using resources that could be better used to stabilize the main business. Investors are worried that Xpeng's cash flow may not be sufficient to support both the automotive and robotics initiatives.
4. Two Positive Aspects in the Financial Report
The half-year report does have some positive aspects that could provide temporary relief but are not enough to solve the company's long-term problems:
- Surging Service Revenue: Services and other revenues reached HK$4.73 billion, a year-on-year increase of 67%, mainly due to a partnership with Volkswagen. This high-gross-margin segment can help reduce overall losses.
- Overseas Market Progress: Overseas revenue increased to HK$8.23 billion, rising from 15% to 25% of total revenue, indicating that Xpeng is doing well internationally. This is a potential area for future growth, but it is not enough to reverse the current financial situation.
5. Investors' Main Concern: Short-Term Challenges
The market's panic stems from a mismatch between expectations and reality:
- Investors want immediate profits, but Xpeng's focus is on the potential of the robotics business in the future. With the core automotive business still facing difficulties and high R&D costs, investors are concerned that the company will not be able to cover its expenses.
6. He Xiaopeng's Fundraising Attempt
He Xiaopeng is seeking $900 million in financing (with the robotics business valued at $6.3 billion post-funding) to diversify risks. However, investors would prefer to see a stabilization in sales volume and a reduction in losses. Only when the core business is on a more solid footing will the robotics business be able to contribute to the company's success.
Conclusion
Xpeng Motors' immediate priority should be to improve its automotive sales and reduce its losses. Otherwise, its stock price is likely to continue to decline.