XPEV - The XPeng G9 Is A Game Changer

Summary

• Being able to get over 200 km of range from just a 5-minute charge is a true breakthrough for the XPeng G9.
• It is rare to see Tesla losing in head-to-head charging tests.
• NIO and Tesla have ultrafast charging capabilities coming soon, but the XPeng technology is already here!

Introduction

It's a big deal that the XPeng ( XPEV ) G9 is capable of getting over 200 km of range from just a 5-minute charge. My thesis is that the XPeng G9 is a game changer with respect to charging speeds. A quick way to visualize the amazing charging rate of the G9 is to check out the time lapse video in the November 21st tweet by @XPengMotors.

A November 18th tweet shows the incredible charging ability of the G9. Their 4C battery can get over 200 km of range from just a 5-minute charge, while their 3C battery can get 130 km in the same time. For comparison, the fastest Tesla ( TSLA ) Superchargers in my area me give me about 50 miles or 80 km in 5 minutes when the conditions are just right. Note below that other mass-produced battery electric vehicles ("BEVs") tend to get 60 km or less during 5-minute charging sessions on 250 kW chargers. Additionally, most of the non-Tesla chargers out there in the US are quite a bit less than 250 kW, such that the range from a 5-minute charging session is far less than 60 km:

The G9 was introduced in late 2022 and its price point is high relative to other vehicles shown in XPeng's 2021 annual report :

1 RMB is equivalent to about $0.14 at the time of this writing.

Current Ultrafast Charging

The XPeng G9 Launch Event revealed that technological breakthroughs have taken place such that XPeng believes the G9 has the world's fastest charging speed of any BEVs.

We believe that only when charging a BEV becomes as convenient and fast as refilling an ICE vehicle will customers embrace the new era of electric mobility. Today we're delighted that we've reached a new step. G9 is the world's fastest charging SUV. I hope you have seen the live tests we performed at the supercharging event last month. We reached the milestone of charging 200 km in just five minutes. Thanks to the supercharging capabilities of the [G9's 4C version], our new 480 kW supercharging stations can also charge G9 from 10% to 80% in as little as 15 minutes.

The G9 Launch Event goes on to show the G9 beating a Tesla Model Y in numerous head-to-head charging tests.

HotCars notes that XPeng says they have China's first 800V mass-production Silicon Carbide ("SiC") platform, and they cite a YouTube video with a fast forward of x50 that shows the unbelievable charging speed for a G9 at an S4 supercharger. The battery is shown with a starting charge range of 55 km. It then shows the charger in action as it boosts the battery up from 55 km to 265 km for an increase of 210 km before the 5-minute timer expires. There are about 0.62 miles per kilometer, so 210 km works out to be about 130 miles. It's mind boggling to see 130 miles of range being added in 5 minutes:

For comparisons, there are some fast 250 kW Tesla superchargers near me that add range much faster than other types of chargers. At one location, I saw my Tesla Model Y charging at a speed of over 600 mph at one point. If it were to maintain that rate then it could add 100 miles of range in about 10 minutes or about 50 miles in 5 minutes. The part about maintaining the rate is important because the rate tends to be faster when the Model 3 or Model Y battery is low and slower as the battery gets fuller. TorqueNews makes it easier to understand this phenomenon with a table:

Zeekr ( GELYF ) claims that its new 001 with a range of 1,032 km is the world's longest-cruising-range EV. I expect batteries with 1,000 km of range to become more common in the years ahead, but they're not as perfect as one might think. For one thing, it can be impractical to charge past 80% as it can take the same amount of time to go from 10% to 80% as it does to go from 80% to 100%. This means 1,000 km batteries will often be charged to just 800 km. Additionally, the real life range is virtually never the same as the claimed range, where the tire pressure is perfect, and the acceleration is slow. In the case of my Tesla Model Y, I tend to get about 2/3rds of the claimed range. This means that if I had a 1,000 km battery, I would tend to charge it to just 800 km and the real life range I would get is about 2/3rds of that or 533 km, which is about 330 miles. The point here is that ultrafast charging is important, even when folks have bigger batteries that don't need to be charged as often.

Upcoming Ultrafast Charging

The December 24th NIO ( NIO ) Day event was in Chinese, but Gizmochina summed up some of the charging developments in English. NIO's new 500 kW charging architecture has a maximum current output of 660A, and it can recharge an EV built on the 800 V platform from 10% to 80% in just 12 minutes. The charging time extends to 20 minutes for EVs built on the 400 V platform. Note that the XPeng architecture is 480 kW with a maximum output of 670A. Gizmochina says the NIO chargers will be able to charge some of the XPeng BEVs to 80% in 15 minutes. ArenaEV reports that these NIO chargers are expected to be in operation by March.

Tesla developed their 1000V Supercharger V4 system for their semi truck and Notebookcheck reports that Tesla's Cybertruck will benefit from it:

Apparently, Tesla will finally enter the ultrafast EV charging era with the Cybertruck, as Elon Musk said the electric pickup will be able to take advantage of Tesla's brand new liquid-cooled 1MW V4 Supercharger system from the Semi, though he didn't specify to what extent. This means that the Cybertruck's big battery will also allow to be charged really fast compared to the current 350kW network of V3 Superchargers, and Tesla will finally catch up to the Chinese electric car brands like NIO or XPeng which are already at the 500kW charging mark with their 800V drivetrains.

The announcements by NIO and Tesla are exciting, but the XPeng technology is easier to fact-check as it is already in place!

Valuation

Again, XPeng needs to build out S4 supercharging stations with expensive transformers. The series of tweets from November 21st above said that there were 7 S4 supercharging locations in 5 of China's biggest cities at that time, and that XPeng was planning on opening another 50 S4 locations across China by the end of 2022. At the XPeng G9 Launch Event, the following was said about S4 supercharging stations:

By the end of this year [2022] more than 50 S4 supercharging locations will be in operation in major cities across China. Next year we plan to expand our charging network in key cities and along highways across the country. That means at least 500 S4 supercharging locations up and running.

This buildout will be expensive and investors need to keep an eye on the financials to make sure XPeng is able to support this investment.

It is disturbing to see that XPeng delivered far fewer vehicles in 4Q22 than they did in 4Q21, per CnEVPost :

Regarding the 41,751 deliveries in 4Q21, the release shows that 21,342 of them were P7s and 7,621 of them were P5s. I'm assuming that G3s were responsible for the bulk of the remainder. A December 31st news release shows that 22,204 vehicles were delivered in 4Q22 and that 11,292 of them were in the month of December. Regarding the flagship G9, monthly delivery numbers for 2022 were as follows:

October: 623

November: 1,546

December: 4,020

I believe it is important for XPeng to continue increasing the number of high-end G9's sold each month. The gross margin can improve with volume, but in many respects, the price of the car is more important than volume. Looking at the 2021 20-F for Ferrari ( RACE ) as an example, they only sold 11,155 cars in 2021, but these are expensive cars and Ferrari has really high gross margins. In 2021, Ferrari had net revenues of €4,270,894 thousand and a cost of sales of €2,080,613 thousand such that the gross profit was €2,190,281 thousand and the gross margin was 51.3%.

I like to look at XPeng, NIO and Tesla through the same lens because they only sell BEVs, and they are publicly traded. BYD ( BYDDY ) is nice to look at as well because they don't sell ICE vehicles, although they do sell PHEVs. BYD sold 111,939 BEVs in December while NIO delivered 15,815 and XPeng delivered 11,292 per Investor's Business Daily . Looking at the first three quarters of 2022, XPeng and NIO had similar gross margins and similar unit deliveries:

I don't see quarterly income statement numbers for Geely ( GELYF ) but their 2022 interim report shows 1H22 gross profit of RMB 8,475,802 thousand on revenue of RMB 58,183,773 thousand for a gross margin of 14.6%. It is crucial for us to look at gross profit in addition to units when comparing EV companies. I expect Geely's high-end 001 to help their gross profit immensely, while their Panda mini EV will be a boost to units but not gross profit. Leapmotor sells less expensive BEVs like the T03 mini car, and their gross margin for 3Q22 was negative 8.9%.

XPeng's 3Q22 gross profit was RMB 923,238 thousand or about $130 million US on revenue of RMB 6,241,143 thousand. This was up 12.5% from the 3Q21 gross profit of RMB 820,824 thousand on revenue of RMB 5,719,918 thousand. The 3Q22 release says that 4Q22 revenue is expected to be RMB 4.8 billion to RMB 5.1 billion, which is a year-over-year decrease of about 40 to 44%. XPeng is still operating at a loss, and the 2021 annual report shows that FCF is negative as well. It's hard to say what XPeng is worth at this time, as these are still early days and there are many variables.

The 3Q22 results show that each ADS represents two Class A ordinary shares. The results show the weighted average number of ordinary shares used in computing net loss per share was 1,718,162,864. Dividing by 2 and multiplying by the January 3rd share price of $10.18 gives us a market cap of $8.7 billion. The balance sheet can be a bit nebulous, and I'm not sure how the enterprise value compares to the market cap. It's hard to say if Mr. Market is reasonable with today's stock price

Forward-looking investors should continue to watch the G9 unit numbers as well as the unit numbers of other high-end models that are upcoming. If these go well, then the gross profit should pick up and our valuation outlook should go higher.

For further details see: