U.S. listed Chinese EV Xpeng (NYSE:XPEV) stock has underperformed considerably, declining by about 52% year-to-date. While investors have been reducing exposure to high-growth stocks and Chinese names, amid potential delisting concerns in the U.S., Xpeng’s performance has been much worse than rivals. For perspective, Nio (NYSE: NIO) is down by about 29% year-to-date, while Li Auto (NASDAQ:LI) stock is actually up by about 5%.
Now Xpeng’s delivery performance has actually been solid thus far in 2022. For the first seven months of the year, the company has delivered 80,507 vehicles in total, marking an increase of 108% over last year. In comparison, Nio delivered 60,879 vehicles year-to-date in 2022, rising 22.0% year-over-year, while Li Auto has delivered about 71,000 vehicles, up about 82% versus last year. This is commendable, given that the broader Chinese auto sector has been weighed down by Covid-19-related lockdowns and supply shortages. So what are the factors that are weighing Xpeng stock down? One reason could be that investors are concerned about the economics of Xpeng’s business. While premium EV players typically have thick gross margins, with Nio posting margins of about 18% and Li Auto posting margins of 22% in Q1, Xpeng’s margins are far lower at just about 10%. The company’s average selling prices are also below rivals such as Nio. Separately, Xpeng’s guidance for Q2 also missed street estimates and this has also resulted in some selling pressure for the stock, as it traded at a higher price to sales multiple compared to its peers.
Now despite the plummeting stock price and listing concerns, the outlook for Xpeng’s core business actually appears pretty strong. Firstly, overall EV demand and favorable regulation in China remain a big tailwind for Chinese EV players. Between January and July deliveries of new energy vehicles – a broad term that includes hybrids, EVs, and fuel cell vehicles – rose by over 2x versus last year. Xpeng also has new products in the offing, with its flagship G9 SUV likely to be launched in September and this could also drive volumes and average pricing higher. Xpeng’s production could also pick up further, with the semiconductor shortage, which crippled automotive production for almost two years, showing signs of easing, and with Covid-19-related issues also stabilizing in China, after months of lockdowns. The company has also been making inroads into the European market and this could be well-timed, considering that EV demand in the E.U. is only poised to rise as the bloc looks to cut its dependence on hydrocarbon imports from Russia.
Check out our analysis on Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for more details on how Nio stock stacks up versus its peers Xpeng and Li Auto.What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.
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