Daily Brief: Xpeng Is Spending Big On R&D To Meet China’s Electric Vehicle Moment

Daily Brief: Xpeng Is Spending Big On R&D To Meet China’s Electric Vehicle Moment

about 2 years ago3 mins

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Xpeng reported a mixed set of results on Tuesday, but the Chinese electric vehicle (EV) maker has a crack team of engineers working round the clock to nail it next time.

What does this mean?

Xpeng delivered more than 25,000 cars last quarter – a record high and nearly three times as many as the same time in 2020. That drove revenue up by a much better-than-expected 187% compared to the same time last year. But it had plenty of outgoings too: the company’s been spending big on developing new cars, as well as on self-driving tech that’ll allow it to build robotaxis down the line. So it follows that the company’s research and development costs were twice what they were in the third quarter of last year, and that the company made a bigger-than-expected loss. Still, the company sees that as a necessary bump on the road to glory: Xpeng said it’s expecting to break delivery records this quarter too.

Why should I care?

The bigger picture: This is a big pond.

China’s the biggest EV market in the world, and it’s growing at a rate of knots: EV sales in the country are on track to hit 3 million by the end of the year – more than double last year’s total. And while there is a lot of competition from the likes of Tesla, NIO, and Li Auto, the market’s so big that Xpeng shouldn’t have any problem growing its sales for the foreseeable future.

China EVs

Zooming out: Feel the power.

It’s not just the carmakers having all the fun: CATL – the world’s biggest manufacturer of EV batteries – became China’s second-biggest domestically listed company by market value earlier this week, having seen its share price more than double over the last year. And that might just be the start: the US government’s next spending proposal includes tax incentives for EV buyers, and it could boost demand for CATL’s batteries even more.

CATL size

Keep reading for our next story...

Zoom Reported Better-Than-Expected Results, But Investors Still Aren’t Convinced

Zoom image

Zoom reported better-than-expected quarterly results late on Monday, so let’s just hope no one quits while the teleconferencing company is ahead…

What does this mean?

Zoom always knew lockdowns weren’t going to last forever, which is precisely why the company’s been looking for ways to make sure its business keeps growing no matter what. One of its priorities has been to raise the profile of its hybrid product: a conference room setup that’ll connect those in meeting rooms to those in their living rooms. The other has been to double down on big business customers, which has been proving particularly fruitful: the number of customers spending more than $100,000 a year with Zoom nearly doubled last quarter from the same time the year before. Smart moves, both: they helped lift the company’s revenue by a better-than-expected 35% versus the same time a year ago.

Zoom revenue
Source: The Wall Street Journal

Why should I care?

For markets: Investors are shooting their own foot.

Investors clearly have their doubts about Zoom’s long-term future, having sent its stock down more than 30% since July. But the irony is that they’re the ones making it more difficult for Zoom to limit the very drop-off in growth they’re worried about. Take the Five9 saga: Zoom announced plans to buy the customer support software provider in July using its shares as payment, in an effort to diversify its business offerings and shore up its growth. But with investors continuing to send Zoom’s share price south over the next couple of months, Five9 ended up calling the whole thing off.

Zoom stock
Source: Google Finance

Zooming out: Out of the frying pan.

Then again, maybe we’re not quite done with Zoom calls just yet: Austria just imposed its fourth national lockdown this week on the back of rising coronavirus infections, and Germany’s reportedly thinking about doing the same. That might be why the company’s revenue outlook for this quarter came in better than expected, then…

Cases in Europe
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