With Its Stock Down 48% This Year, What’s Happening With Xpeng Stock?

XPEV: XPeng logo
XPEV
XPeng

Chinese luxury EV maker Xpeng (NYSE:XPEV) deliveries for June rose by 24% year-over-year to 10,688 units. The number was also up by 5% compared to the last month. Xpeng has been benefiting from the ramp-up of sales of the premium X9 multi-purpose vehicle which was launched in early January. The luxury MPV – which has a starting price of about $50,000 – sold a total of 1,687 units last month. However, Xpeng’s performance continued to lag behind its principal rivals. For instance, Li Auto (NASDAQ:LI) , which is the largest of the emerging EV players in China, delivered 47,774 vehicles for June 2024, an increase of 46.7% compared to last year driven by higher sales of its lower-priced vehicle the Li L6 and also due to some price cuts.  Nio (NYSE: NIO) delivered 21,209 vehicles, a 98% year-over-year increase, driven in part by price adjustments and changes it made to its EV battery rental service.

Despite some recent growth in deliveries, XPEV stock has suffered a sharp decline of 80% from levels of $45 in early January 2021 to around $8 now, vs. an increase of about 45% 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, and 47% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – 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; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and HD, and even for the megacap stars GOOG, MSFT, and AAPL.

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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Xpeng’s financial metrics have been looking up of late. For Q1 2024, the most recently reported quarter, the company saw average revenue per vehicle rise to about $42,000, up from just about $28,000 in the year-ago quarter. This is largely due to a higher mix of sales of the more expensive X9 vehicle. Xpeng’s gross margins have also picked up, coming in at 13%, up from under 3% in the year-ago quarter driven by higher sales of technical services following the company’s collaboration with the Volkswagen Group relating to platform and software. Xpeng, which is seen as a leading player in the self-driving software space, is seeing adoption rise quickly. For June, the active user penetration rate of Xpeng’s driving assistance tools in urban driving scenarios reached 84%. The company is also slated to release a major upgrade to AI Tianji OS its in-car operating system in Q3, and this could further improve its competitiveness.

Xpeng also plans to launch more than 10 brand-new models over the next three years, while also partnering with Volkswagen to co-develop VW-branded EVs in a strategic partnership. Xpeng also intends to move beyond the luxury market toward more mass-market models. The company plans to launch its new sub-brand Mona shortly, with the vehicles expected to be priced under RMB 150,000 yuan ($21,000), allowing it to compete head-on with the likes of BYD for much bigger volumes in the mass market. 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 Jul 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 XPEV Return 4% -48% -82%
 S&P 500 Return 1% 15% 145%
 Trefis Reinforced Value Portfolio 0% 7% 657%

[1] Returns as of 7/3/2024
[2] Cumulative total returns since the end of 2016

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