What’s New With Xpeng Stock?

Chinese luxury EV maker Xpeng (NYSE:XPEV) deliveries for July stood at 11,145 units, up 1% year-over-year and 4% over the previous month. The marginal growth has been driven in part by higher 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 1,459 units last month. However, Xpeng’s performance lagged rival Li Auto (NASDAQ:LI). Li, which is the largest of the emerging EV players in China, delivered 51,000 vehicles for July 2024, an increase of 49% 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 20,498 vehicles, roughly flat versus last year.

XPEV stock has suffered a sharp decline of 80% from levels of $45 in early January 2021 to around $8 now due to concerns about the Chinese economy and increasing trade barriers for the import of Chinese EVs into both the U.S. and the E.U. Xpeng’s uneven growth rates and loss of ground to rival Li Auto also appear to be holding the stock back. This compares to 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 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?

Despite concerns about the economy and weakness in the global EV market, the Chinese EV space is still showing promise. A few months ago, China introduced new incentives of RMB 10,000 (approximately $1,410) for consumers who replace their gasoline cars with electric and low-emission vehicles and there have been reports that this subsidy could be doubled to 20,000 yuan ($2,800) per vehicle. The move could benefit Xpeng, as the company 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 200,000 yuan (about $27,500), allowing it to compete head-on with the likes of BYD for bigger volumes in the mass market. 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, with gross margins also rising. This is partly due to a higher mix of sales of the more expensive X9 vehicle and a patent licensing deal with Volkswagen. Xpeng stock trades at just about 1.25x forward revenues, which is a reasonable valuation. That being said, there are risks as well, given the mixed Chinese economy. The trade wars between the U.S. and China and rising trade barriers in Europe also pose a risk for companies such as Xpeng. 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 Nio and Li Auto.

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