Xpeng’s Deliveries Jumped 78% In December, What’s Next For The Stock?

XPEV: XPeng logo
XPEV
XPeng

Chinese luxury electric vehicle maker Xpeng stock (NYSE:XPEV)  had a strong December, selling a record 20,115 vehicles for the month, marking an increase of 78% compared to the year-ago period. This also marks a slight increase from the 20,041 vehicles the company delivered in November. Growth was likely driven by the company’s G6 Ultra Smart Coupe which goes head to head with Tesla’s popular Model Y vehicle. Xpeng offered a discount of RMB 10,000 (about $1,400), on the vehicle. Xpeng’s delivery growth was well ahead of rival Nio which delivered about 18,000 vehicles for December, marking an increase of 14% year-over-year. However, Li Auto stock (NASDAQ:LI) remains the largest and fastest growing of the three luxury EV players, delivering 50,353 units for the month, up almost 2.4x compared to last year. Li continues to benefit from demand for its unique vehicles which combine gasoline generators with batteries to extend the range of EVs and reduce range anxiety.

Looking at a slightly longer period, XPEV stock has suffered a sharp decline of 65% from levels of $45 in early January 2021 to around $15 now, vs. an increase of about 25% for the S&P 500 over this roughly 3-year period. However, the decrease in XPEV stock has been far from consistent. Returns for the stock were 18% in 2021, -80% in 2022, 47% in 2023, and 0% in 2024 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 0% in 2024 (YTD) – indicating that XPEV underperformed the S&P in 2021 and 2022.

In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could XPEV face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a recovery?

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There are concerns about global EV demand, with most mainstream automakers, including Volkswagen, Mercedes, Ford, and GM indicating a softer-than-expected uptake. However, demand doesn’t appear to be an issue at the moment in China. Total sales of electric vehicles in China reached 1.026 million units in November. Over the January to November period, total EV sales rose by 36.7% year-over-year to 8.3 million units. That being said, competition is mounting and this has resulted in considerable price wars, reducing Xpeng’s pricing power. Xpeng’s financial performance has been quite weak of late. For Q3, the company posted its widest-ever net loss since going public, while its vehicle gross margins came in at negative 6.1%, down from 11.6% in the year-ago period. Li Auto, on the other hand, has actually expanded its margins. While Xpeng stock trades at about 3.1x forward revenues, ahead of even Li Auto, which is a slightly faster-growing company, there are some positives for Xpeng. Xpeng is seen as a strong player in the self-driving software space and the company is also partnering with Volkswagen to co-develop two mid-sized VW-branded EVs

 Returns Jan 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 XPEV Return 0% 0% -66%
 S&P 500 Return 0% 0% 113%
 Trefis Reinforced Value Portfolio 0% 0% 610%

[1] Month-to-date and year-to-date as of 1/1/2024
[2] Cumulative total returns since the end of 2016

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