Chinese electric vehicle maker XPeng issued a disappointing fourth-quarter revenue forecast on Monday, signaling that even record-breaking delivery numbers can’t shield automakers from China’s relentless EV price war that continues eroding profitability across the sector.

The Guangzhou-based automaker projects Q4 revenue between 21.5 billion yuan ($3.03 billion) and 23 billion yuan, falling well short of analysts’ average estimate of 26 billion yuan, according to Reuters. XPeng’s U.S.-listed shares dropped nearly 3% in premarket trading following the announcement, despite the company posting strong third-quarter results and record October deliveries.

Surging Sales Volume Can’t Offset Margin Pressure

XPeng’s third-quarter performance tells a story of impressive growth constrained by brutal market realities. The company reported revenue of 20.38 billion yuan, meeting expectations and driven by a stunning 149.3% year-over-year jump in vehicle deliveries to 116,007 units. The automaker’s net loss narrowed significantly to 380.9 million yuan from 1.81 billion yuan a year earlier.

For the fourth quarter, XPeng expects vehicle deliveries to grow between 36.6% to 44.3% year-over-year, projecting 125,000 to 132,000 units. Yet this delivery growth trajectory—numbers that would make most automakers celebrate—translates to revenue forecasts that disappoint Wall Street by roughly 12%.

The cautious outlook arrives despite XPeng and rival NIO both posting record deliveries in October, even as Tesla’s China sales slumped to a three-year low of 26,006 vehicles. This contrasting performance underscores the uneven impact of China’s pricing bloodbath, where domestic brands gain market share but sacrifice margins in the process.

Mass-Market Push Creates Brand Positioning Challenge

Third Bridge analyst Rosalie Chen identified a critical strategic problem facing XPeng: “Since the launch of the mid-to-low-end Mona 03 last year, combined with reduced investment in intelligent driving, XPeng has lost its brand appeal in models priced above 200,000 yuan,” Chen told Reuters.

The Mona M03, XPeng’s ultra-affordable model launched in August 2024 starting at just 119,800 yuan ($16,812), represents the automaker’s aggressive push into China’s mass-market EV segment. Built in partnership with ride-hailing giant DiDi, the budget sedan has driven significant volume growth but appears to have diluted XPeng’s premium positioning.

This mirrors broader challenges facing Chinese EV makers attempting to compete simultaneously across multiple price segments. When we covered XPeng’s Q2 revenue boost in May, the company was celebrating 330.8% first-quarter delivery growth. Now, just six months later, that volume success story confronts the harsh reality of compressed margins and weakened brand perception.

AI Investments Add Pressure to Near-Term Profitability

XPeng’s ambitious technology roadmap compounds its financial challenges. At an AI Day event earlier this month, the company unveiled work on future consumer-facing “flying car” concepts and humanoid robots aimed at factory and warehouse uses. These long-term projects demand heavy research and development investment that further pressures near-term earnings.

CEO He Xiaopeng emphasized the company’s transformation beyond traditional automaking, stating “I firmly believe XPeng will evolve into a global embodied AI company.” While this vision positions XPeng for potential future revenue streams, it requires sustained investment during a period when the core automotive business faces intense margin compression.

Tesla Stumbles While Chinese Rivals Post Record Numbers

The contrasting fortunes of foreign and domestic brands in China’s EV market have never been starker. While XPeng and NIO delivered record October volumes, Tesla’s China sales collapsed to their lowest level since November 2022. The American EV giant’s market share in China shrank to just 3.2% in October, down sharply from 8.7% the previous month.

This performance gap reflects how China’s prolonged price war has fundamentally reshaped competitive dynamics. Domestic manufacturers like XPeng, BYD, and NIO understand Chinese consumer preferences and can adjust pricing strategies more aggressively, even at the cost of profitability. Foreign brands, particularly Tesla, find themselves increasingly isolated in a market where volume leadership no longer guarantees financial success.

EVXL’s Take

We’ve been documenting the unsustainable trajectory of China’s EV price war throughout 2025, and XPeng’s disappointing Q4 forecast represents another data point confirming what we’ve been saying for months: winning the volume game doesn’t mean winning the market.

Back in August, we reported on XPeng CEO He Xiaopeng warning employees that “the market will definitely see fiercer competition in 2025” and that some auto companies would not survive the looming price war. Now we’re seeing exactly that scenario play out—even the survivors are struggling.

The profitability paradox XPeng faces is brutal: deliver record numbers or lose market share, but accept razor-thin margins either way. AlixPartners’ July prediction that only 15 of China’s 129 EV brands will survive to 2030 suddenly looks conservative. The math doesn’t work when you’re spending billions on AI moonshots like flying cars while your core business can’t generate sustainable profits despite 149% delivery growth.

XPeng’s Mona M03 strategy reveals the trap: chase volume with budget models and crater your premium brand positioning, or maintain margins and watch BYD eat your lunch with $7,780 Seagulls. There’s no winning move here, just different ways to lose more slowly.

The real question isn’t whether XPeng survives—they probably will, given their technology partnerships with Volkswagen and growing global ambitions. The question is whether any Chinese EV maker not named BYD can actually make money in this market. Right now, the answer looks increasingly like “no.”

What do you think? Can XPeng break out of the volume-versus-margins death spiral, or is this the new normal for Chinese EV makers? Share your thoughts in the comments below.