Surging Delivery Growth Boosts Xpeng Stock

author: FutureCar Staff    

Chinese luxury electric vehicle maker Xpeng has experienced strong growth in its stock, rising nearly 60% year-to-date. The company had a successful October, with deliveries reaching 20,002 vehicles, a 292% increase compared to last year and a 30% gain compared to the previous quarter. The growth was driven by the popularity of the G6 Ultra Smart Coupe, Xpeng's latest model, which competes with Tesla's Model Y. Xpeng has significantly increased production for the G6, making it the best-selling battery electric SUV in its price segment. In comparison, rival Nio delivered 16,074 vehicles in October, a 60% YoY increase, while Li Auto delivered 40,422 vehicles, a 4x YoY increase, benefiting from strong demand for its unique vehicles that combine gasoline generators with batteries.

Despite its recent success, Xpeng's stock has experienced a sharp decline of 65% from early January 2021 to around $15 currently. This is in contrast to the 15% increase in the S&P 500 over the same period. However, Xpeng's stock returns have been inconsistent, with 18% in 2021, -80% in 2022, and 60% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 13% in 2023, indicating that Xpeng underperformed the S&P in 2021 and 2022. Beating the S&P 500 consistently has been a challenge for individual stocks in recent years, even for megacap companies like Google, Tesla, and Microsoft.

In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period. The HQ Portfolio stocks have provided better returns with less risk compared to the benchmark index. Given the current uncertain macroeconomic environment, including high oil prices and elevated interest rates, it remains to be seen if Xpeng will face a similar situation as in 2021 and 2022 and underperform the S&P in the next 12 months.

The global EV market's near-term demand appears mixed, with mainstream automakers like Volkswagen, Mercedes, and GM indicating a softer-than-expected uptake. Automotive chip suppliers have also reported weaker-than-expected demand for automotive semiconductors in the fourth quarter. However, demand in China remains strong, with fully battery electric vehicles accounting for about 25% of the country's automotive sales in September. Nevertheless, increased competition has resulted in price wars, reducing Xpeng's pricing power. The company's financial performance has also been challenging, with its widest-ever net loss in Q2 and negative vehicle gross margins. However, there is optimism for Xpeng as it is considered a strong player in the self-driving software space and has received a strategic investment from Volkswagen. The company is also set to launch a new flagship vehicle, the X9, which could drive incremental volumes and help improve pricing.

In conclusion, Xpeng has experienced significant growth in its stock and deliveries, driven by the success of its latest model. However, the stock has faced a decline and inconsistent returns compared to the S&P 500. The global EV market's demand outlook is mixed, with China showing strong demand but increased competition and pricing pressure. Xpeng's financial performance has been challenging, but the company is seen as a strong player in self-driving software and has received a strategic investment from Volkswagen. The launch of a new flagship vehicle could also contribute to future growth.

FutureCar Staff