What happened

Shares of XPeng (XPEV 2.46%) declined 11.5% through 10:20 a.m. ET after XPeng missed Wall Street forecasts for its first-quarter 2023 earnings this morning.

Heading into the quarter, analysts had predicted this Chinese electric vehicle manufacturer would lose only $0.26 per share on $741 million in quarterly sales. In fact, XPeng reported a loss of $0.37 per share, and its sales were only $590 million.  

So what

It gets worse.

Not only did XPeng fall short of expectations, but Q1 sales were actually down 46% year over year. XPeng lost money on every car it sold, as gross margin on vehicle sales flipped from positive 10.4% to negative 2.5%. Total gross margin company-wide (including positive gross margin from services) fell from 8.7% to just 1.7%, a decrease of 7 full percentage points.  

On the bottom line, losses grew by 38% year over year.

Now what

And as bad as all that sounds, the second quarter doesn't sound much better.

XPeng management painted a bleak picture of sales continuing to decline 36% to 39% year over year in Q2, to somewhere between 21,000 and 22,000 EVs sold "based on the current market conditions." Revenue on those sales are expected to decline 37% to 40% -- a somewhat less steep decline than in Q1, but still pretty steep -- and of course there was no mention of even the possibility of XPeng earning a profit in Q2.

Although CEO He Xiaopeng promised "a virtuous cycle driving product sales growth, team morale, customer satisfaction and brand reputation over the next few quarters," that prediction really doesn't match up well with the specific numbers being predicted for Q2. Investors are disappointed in XPeng's performance today.

And rightly so.