Up 40% This Year Despite Mixed Deliveries, What’s Next For Xpeng Stock?

XPEV: XPeng logo

Chinese luxury electric vehicle maker Xpeng stock (NYSE:XPEV) has seen its stock fare well this year, rising by over 40%, despite some headwinds to its shipments. While Xpeng has lost market share over the first three quarters of the year, amid mounting competition from EV bellwether Tesla and Li Auto, as well as slower-than-expected Chinese economic growth following the Covid-19 reopening, the company saw a recovery of sorts over September. Deliveries grew by 81% year-over-year for September to a record 15,310 units, led by a strong performance of the G6 Ultra Smart Coupe – the company’s fifth model, which accounted for over half of Xpeng’s total deliveries.  This compares to Nio, which saw sales grow by about 43% to 15,641 vehicles. Separately, Xpeng also saw Volkswagen, one of the world’s largest automakers, invest $700 million in the company for a 5% stake. The two companies will also co-develop two mid-sized VW-branded EVs

The Chinese auto market and EV space in particular has fared well. For the first nine months, auto sales in China rose 2.1% to 15.41 million units, while new energy vehicle sales accounted for 36.6% of overall sales in September. However, competition in the market is expected to remain stiff, and this is reducing Xpeng’s pricing power. Moreover, if we exclude the strong performance of Xpeng’s G6 model, the sales of all the other models in the company’s lineup combined actually declined by roughly 30% versus last year. Xpeng’s financial performance has also been tough. For Q2, the company posted its widest-ever net loss since going public, while its vehicle gross margins came in at negative 8.6%, down from 9% in the year-ago period. Q3 results are due next month.  Xpeng also trades at close to 3x forward revenues, which is ahead of Nio and Li Auto, which are both seeing faster revenue growth. Considering this, we think the stock could face pressure in the near term. See our analysis of Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for a detailed look at how Xpeng stock compares with its rivals Li Auto and Nio.

 Returns Oct 2023
MTD [1]
YTD [1]
Total [2]
 XPEV Return -23% 42% -67%
 S&P 500 Return -2% 9% 87%
 Trefis Reinforced Value Portfolio -5% 18% 504%
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[1] Month-to-date and year-to-date as of 10/26/2023

[2] Cumulative total returns since the end of 2016

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