By Jiahui Huang

XPeng shares rose sharply in Hong Kong after the Chinese electric-vehicle maker posted an earnings beat on higher deliveries and a jump in services revenue from its recent collaboration with Volkswagen.

Shares were 13% higher at 34.70 Hong Kong dollars (US$4.45) by midday Wednesday, on track for their biggest one-day gain in almost a year. That rise unwound an 11% drop a day earlier, when weak earnings from rival Li Auto dragged on the sector.

XPeng, an unprofitable business whose deliveries have been trending upward in China's competitive EV market, reported a narrowed net loss and a 62% rise in revenue for the first quarter, beating analysts' estimates. The results were helped by higher software services revenue, thanks largely to payments from Volkswagen related to autonomous driving and in-car software systems. Vehicle margin also rose, partly reflecting efforts to cut costs.

XPeng's guidance for higher revenue and deliveries in the second quarter also helped shares.

In a research note, Goldman Sachs analysts said they think recurring software services revenue will help XPeng maintain a gross margin in the low-to-mid teens throughout 2024. The company's first-quarter gross margin rose to 12.9% from 6.2% last quarter and 1.7% a year earlier.

One of the main catalysts of XPeng's share-price rebound was that "the company's worst fundamental moment has passed," Guotai Junan analyst Ivan Wu said. The EV maker's sales volume has recovered from weak demand during the Lunar New Year, and its cost reductions and improved efficiency have achieved results, he said. Analysts are also hopeful about the coming launch of its subbrand MONA, aiming to compete with mass-market rivals in the under CNY200,000 segment.

That said, "so far, XPeng's vehicle sales in the second quarter are still disappointing," Wu added, but "we believe there are signs of improvement."

Analysts are now watching to see whether new launches can boost sales. The Chinese EV maker will debut its first electric sedan model under the MONA brand next month, with deliveries starting in the third quarter.

Nomura analyst Joel Ying described the first-quarter results as good. But more time is needed to see the effects of new catalysts, including the launch of the MONA sedan with autonomous driving features in June, he said.

Bernstein analysts led by Eunice Lee said XPeng's guidance for the second quarter has shown little improvement. It guided for between 29,000 units and 32,000 units, which implies about 10,000 to 11,000 vehicle deliveries monthly for May and June.

XPeng sold 9,393 units in April, and its sales momentum has fallen off significantly this year despite discounts and price cuts, Bernstein analysts said in a note.

"The lack of volume sustainability in the recent launches is concerning and undermines our confidence in the company's future models," they said.

Write to Jiahui Huang at

(END) Dow Jones Newswires

05-22-24 0115ET