Surging Delivery Growth Boosts Xpeng Stock
【Summary】Xpeng stock has risen by 60% this year, driven by strong delivery growth. The company delivered 20,002 vehicles in October, up 292% YoY, with the G6 Ultra Smart Coupe leading the way. Xpeng's delivery growth surpasses that of Nio but lags behind Li Auto. Despite its recent decline, Xpeng is seen as a strong player in the self-driving software space and has received a vote of confidence from Volkswagen. However, challenges such as competition and pricing wars remain.
Chinese luxury electric vehicle maker Xpeng has experienced significant growth in its stock price, rising by nearly 60% year-to-date. The company had a successful October, with deliveries of 20,002 vehicles, a 292% increase compared to last year and a 30% gain compared to the previous quarter. This growth was primarily driven by the popularity of the G6 Ultra Smart Coupe, Xpeng's latest model, which competes with Tesla's Model Y. Xpeng has ramped up 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% increase year-over-year, while Li Auto delivered 40,422 vehicles, a 4x increase from the previous year.
Despite its recent success, Xpeng's stock has experienced a significant decline of 65% from early January 2021 to its current price of around $15. This is in contrast to the 15% increase seen in the S&P 500 over the same period. However, Xpeng's stock performance has been volatile, with returns of 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 index in 2021 and 2022.
Consistently outperforming the S&P 500 has been challenging for individual stocks in recent years, even for megacap companies like Google, Tesla, and Microsoft. However, the Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500. The HQ Portfolio has 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, there is speculation about whether Xpeng will face a similar situation as it did in 2021 and 2022 and underperform the S&P 500 in the next 12 months, or if it will experience a recovery.
The demand for electric vehicles in the global market 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, in China, demand for fully battery electric vehicles remains strong, accounting for about 25% of automotive sales in September. Despite this, Xpeng faces increasing competition and price wars, which have reduced its 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 potential for improvement in Q3 results due to the company's growing volumes.
Although Xpeng's stock trades at a higher multiple of forward revenues compared to Li Auto, there are positive factors for Xpeng. The company is considered a strong player in the self-driving software space and has recently unveiled an advanced driver assistance system. Xpeng also has plans to launch a new flagship vehicle, the X9 seven-seater multi-purpose vehicle, which could drive additional volumes and improve average pricing. Additionally, Xpeng received a $700 million investment from Volkswagen, along with a strategic partnership to co-develop two mid-sized EVs. This investment is seen as a vote of confidence in Xpeng's capabilities and market access.
For a detailed comparison of Xpeng with its rivals Li Auto and Nio, see our analysis of Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare?
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