With Deliveries Picking Up And Stock Down 47% This Year, Is Xpeng Attractive?

Chinese luxury electric vehicle maker Xpeng stock (NYSE:XPEV) delivered 9,026 cars in March, up 28.9% from a year ago. Growth was largely driven by the ramp-up of sales of the X9 multi-purpose vehicle which was launched in early January with a starting price of about $50,000. X9 deliveries came in at 3,946 units, leading its category in China. In comparison, Li Auto delivered 28,984 vehicles in March, up 39.2% year-over-year, while Nio delivered 11,866 vehicles, up 14.3% year-over-year. While Xpeng’s sales also jumped 98.6% month over month compared to February, this was due to a favorable comparison when sales were weighed down by the Chinese New Year holiday, which impacted manufacturing and sales. Xpeng’s deliveries for Q1 came in at 21,800 units, a 20% increase year-over-year.

Now XPEV stock has suffered a sharp decline of 80% from levels of $45 in early January 2021 to around $8 presently, vs. an increase of about 40% 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 TM, and even for the mega-cap 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?

There are concerns about global EV demand, with most mainstream automakers seeing tepid demand, and scaling back on their electrification goals. For instance, Mercedes-Benz dialed back on its target of going all-electric by 2030, now estimating that only 50% of total sales would be EVs. We’ve seen similar production scalebacks from the likes of Ford as well. While the Chinese EV market is poised to post double-digit growth this year, competition and price wars are mounting, and this has been weighing on Xpeng. For Q4, although the company posted a smaller-than-expected net loss, with total revenue rising by over 150% year-over-year to $1.84 billion, gross margins declined to 6.2%, down from 8.7% in the year-ago period.

However, there are some positives as well for Xpeng. The company is seen as a strong player in the self-driving software space. Last month, the company said that its XPeng navigation guided pilot (XNGP) feature, which enables self-driving in several scenarios, would be available across China, for use on all roads. The offering was initially available only for highway driving scenarios. The company also said that the adoption rate for its advanced driver-assistance system (ADAS), reached 82% in urban driving scenarios. The company 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. 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.

[1] Returns as of 4/2/2024
[2] Cumulative total returns since the end of 2016

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