XPeng’s Q1 Earnings Hit Bottom; New Models to Drive Sequential Improvement

Overview

This report reviews XPeng's Q1 2026 results and provides an outlook for future developments. Nomura believes that although Q1 performance hit a low due to seasonal weakness, sequential improvements in sales volume and financial metrics are expected in subsequent quarters, driven by deliveries of new models such as GX and multiple SUVs, along with rapid overseas expansion. The firm maintains a 'Buy' rating, assigning a USD 23 target price based on a DCF model.

Core views

Earnings Review and Near-Term Outlook: In Q1 2026, XPeng delivered 62,700 vehicles, down 33% YoY and 46% QoQ; revenue totaled RMB 13 billion, down 18% YoY, in line with guidance. Overall gross margin stood at 20.6%, with vehicle gross margin at 12.1%, primarily impacted by product mix shifts. Operating margin was -16.2% due to a 47% YoY increase in R&D expenses, and net loss widened to RMB 1.8 billion—the weakest quarterly result since 2024. New Models Driving Growth: Management guided for Q2 deliveries of 100,000–106,000 units, implying May–June monthly average sales of approximately 34,000–37,000 units, with revenue guidance of RMB 19.6–20.8 billion. Nomura expects Q2 ASP to rise 3% QoQ to RMB 181,000, mainly driven by contributions from the new GX model. Of GX orders, 80% are for the flagship version, with a 30-week wait time; the near-term monthly sales target is 7,000 units, constrained primarily by supply chain bottlenecks. Additionally, new SUV models—including Mona L03, G9L, and Mona L05—will be launched sequentially in the second half of the year, supporting quarter-over-quarter sales recovery. Overseas Expansion and Long-Term Strategy: Overseas markets demonstrate stronger profitability than domestic ones, contributing 20% of total revenue in Q1. With local factory construction underway in Indonesia, Malaysia, and Austria, and new models entering international markets, the company targets overseas monthly sales exceeding 10,000 units by Q4, aiming to double overseas sales in FY2026 compared to FY2025, with a long-term goal of 50% overseas sales mix. In the AI domain, the company plans to mass-produce humanoid robots and flying cars in the second half of 2026 and launch autonomous robotaxi operations in Guangzhou in 2027, allocating RMB 7 billion of its R&D budget to AI initiatives.

Analysis framework

Nomura employs a combination of fundamental analysis and discounted cash flow (DCF) valuation. First, it dissects quarterly delivery volumes, average selling prices (ASP), and gross margin trends to assess short-term operational pressures and inflection points. Second, it closely monitors the impact of new product cycles (e.g., GX and upcoming SUV lineup) on sales momentum and evaluates how supply chain constraints affect delivery cadence. Third, it analyzes overseas expansion strategies and their role in optimizing overall profitability. Finally, it derives an intrinsic valuation based on projected free cash flows, incorporating assumptions for WACC and terminal growth rate.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  DCF Valuation

  Forecasts the company’s future free cash flows and discounts them to present value using an appropriate discount rate (WACC) to estimate intrinsic stock value. In this report, Nomura assumes a WACC of 9.9% and a terminal growth rate of 1.5%.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Volume-Price Decomposition Analysis

  Decomposes revenue growth into two dimensions: volume (deliveries) and price (ASP). The report uses changes in delivery volumes and ASP fluctuations to identify revenue drivers and assess product mix upgrades.

• Competitive & Strategic FrameworkProduct life cycle

  New Product Cycle Driver

  Focuses on how new vehicle launches impact sales volume and market share. The report emphasizes that the introduction of GX and subsequent SUVs will drive sequential sales improvement, highlighting the critical role of product cycles in earnings recovery.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• XPENG INC (XPEV.US)

  Primary beneficiary; new product cycle and overseas expansion driving earnings improvement

  Strengths

  Leading intelligent driving technology, strong GX order backlog, higher overseas profitability than domestic

  Weaknesses

  Weak Q1 performance, elevated R&D expenses leading to wider losses

  Risks

  New model sales below expectations, intensifying competition in China’s auto market, slower-than-expected progress in AI businesses

Key data

• Q1 2026 Deliveries62,700 unitsDown 33% YoY, down 46% QoQ
• Q1 2026 RevenueRMB 13 billionDown 18% YoY, down 41% QoQ
• Q1 2026 Net LossRMB 1.8 billionNet loss widened by 169% YoY
• Q1 2026 Overall Gross Margin20.6%Up 5.0pp YoY, down 0.7pp QoQ
• Q2 2026 Delivery Guidance100,000–106,000 unitsImplies monthly average of 34,000–37,000 units
• Q2 2026 Revenue GuidanceRMB 19.6–20.8 billionUp 7–14% YoY
• Target PriceUSD 23.00Based on DCF model, implying 1.6x FY2026 EV/Sales

Impact & implications

The report argues that XPeng is currently at an earnings trough. As new models ramp up and the share of high-margin overseas sales increases, the company’s profitability and cash flow are expected to gradually recover. In the long term, successful execution of its physical AI initiatives—such as humanoid robots and flying cars—could unlock new growth avenues. The maintained Buy rating reflects confidence in the company’s turnaround potential and long-term ability to monetize technological innovation.

Risks

• New model sales in 2026 fall short of expectations
• Further intensification of competition in China’s automobile market
• Slower-than-expected development of robotaxis and humanoid robots

What to watch

• Monthly delivery data for GX and subsequent new models
• Overseas sales mix and profitability trends
• Production timelines for humanoid robots and flying cars
• Whether Q2 gross margin remains around 20%