Aug 18 Reuters Xpeng, on Friday forecast thirdquarter revenue below analysts39; expectations and reported a hit to margins following an inventory writedown, sending its U.S.listed shares down 7 before the bell.

The Chinese electric vehiclemaker forecast revenue of 8.5 billion yuan to 9 billion yuan for the current quarter ending September, below estimates of 9.77 billion yuan 1.34 billion, according to the average estimate of six analysts by Refinitiv.

The forecast underscores weak demand in China and intense competition following price cuts unleashed by Tesla and other homegrown automakers.

China39;s passenger vehicle sales fell for a second month in July, as discounts and government support measures failed to persuade consumers wary of buying cars amid a sputtering economy.

In the second quarter ended June 30, Xpeng39;s revenue decreased 32 to 5.06 billion yuan, in line with estimates.

Gross margins were negative 3.9, compared with 10.9 a year earlier, due to inventory writedowns related to its G3i crossover sports utility vehicle.

The company attributed the writedown in part to higher demand for the G6 SUV launched in June.

With the G6 and other new products accelerating sales growth, we expect gross margin to gradually recover while operating efficiency continues to improve and free cash flow to substantially improve, copresident Hongdi Brian Gu said.

1 7.2905 Chinese yuan renminbi

Reporting by Yuvraj Malik in Bengaluru; Editing by Sriraj Kalluvila

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