It has been about half a year since we published our report on Xpeng and we would like to give an update on the company.
Despite global chips shortage, which seems to have affected NIO the most, Xpeng delivered an all-time high of 10,412 EVs in the month of Sep 2021, with total deliveries of 56,404 Year-To-Date, exceed our expectation of 54,000 for the same period.
Xpeng has also recently launched their new P5 family Sedan, the world’s first LiDAR-equipped mass-production vehicle. It is priced from 157,900–223,900 yuan, undercutting Tesla’s Model 3 which starts from 250,900 yuan. We believe the pricing of P5 will help Xpeng compete in the EV space in China that has been swarmed with rivals.
Key risks
Despite the broadly positive outlook that Xpeng has, there remain certain risk factors that may impact the company in the short term.
China regulatory crackdowns
Risk sentiment has been low for Chinese stocks ever since they started a wave of crackdowns targeting large technology firms in China. Although sentiments have improved in recent weeks, investors are still wary about investing in Chinese companies, fearing additional regulatory crackdowns coming from the Chinese authorities. Such fears are especially warranted for the electric vehicle industry due to the influx of companies into the EV space in China.
Other market factors
Apart from the regulatory crackdowns, risk sentiment is further weighed down by the Evergrande crisis as well as the energy crisis in China, as investors fear the contagion effect that these crises may bring about.
Also, lower subsidies for electric vehicles in China may eat into the margins of Xpeng despite a surge in their sales.
Xpeng’s outlook
Despite the key risks mentioned above, Xpeng continues its upward trajectory, and even outperforming some of its peers. We maintain our expectations of 80,000–85,000 delivery for the year 2021 and a price target of US$60 per share.
