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Is XPeng Stock a Buy?

By Rekha Khandelwal – Jan 13, 2022 at 4:43AM

Key Points

  • XPeng's electric vehicle deliveries rose 263% year over year in 2021.
  • The EV maker operates roughly 660 of its own supercharging stations across China.
  • XPeng stock is trading at an attractive valuation compared to its EV peers.

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The electric vehicle company delivered more vehicles than both Nio and Li Auto in December.

China is a leading market for electric vehicles. BloombergNEF estimates there were global sales of roughly 6.3 million electric vehicles (EVs) in 2021. Of these, around 3 million were sold in China. XPeng (XPEV 5.56%) sold 16,000 EVs in China in December, which looks impressive considering that it is competing with far bigger and more established companies in the sector.  Let's discuss if the EV stock is a buy right now.

XPeng's EV sales growth

Some top players dominate the Chinese EV market. BYD (BYDDY 4.37%) (BYDD.F 3.90%) sold the most electric vehicles in China in December --92,823 -- of which 48,317 were fully electric, while the remaining were plug-in hybrids.

A person looking thoughtful while working on his laptop.

Image source: Getty Images.

Tesla sold nearly 53,000 EVs in November in China, all of which were fully electric. Other dominant players in the Chinese EV market include a joint venture of SAIC Motor, General Motors, and Wuling Motors, which sold more than 50,000 EVs in November. GAC Group and Great Wall Motors each sold more than 15,000 EVs in November. 

Following the above players are new pure-play EV companies including XPeng, Li Auto (LI 6.63%), and Nio (NIO 3.02%). Notably, Li Auto currently offers plug-in hybrids rather than fully electric vehicles. XPeng grew its EV sales rapidly in the last couple of months.

Monthly vehicle deliveries.

Data source: XPeng, Li Auto, and Nio. Chart by author.

XPeng's EV sales have been higher than each of Nio and Li Auto for three months in a row. XPeng delivered 98,155 EVs in 2021, rising 263% year over year. The company has so far delivered 137,953 vehicles. 

XPeng has been growing its revenue impressively over the last several quarters.

XPEV Revenue (Quarterly) Chart

XPEV Revenue (Quarterly) data by YCharts

Its average quarterly year over year revenue growth in the last one year is higher than its top peers. Given the expected growth in the Chinese EV market, XPeng is well-placed to grow even if it maintains its current market share. The company's attractive range of offerings, and the customers' response to its models, could help it achieve that objective.  

An attractive range of offerings

XPeng currently offers three models -- the P7 sports sedan, the P5 family sedan, and the G3 SUV. The company offers different versions of P7 with different specifications. Pricing starts from Renminbi 229,900 ($36,000) for the standard version going up to RMB 409,900 ($64,300) for the High Performance version.  XPeng started deliveries of the P5 family sedan in October. Its pricing ranges from RMB 160,000 ($25,100) to RMB 230,000 ($36,000). By comparison, pricing for the G3 SUV starts from RMB 149,800 ($23,500).

In November, XPeng launched a new model, the G9. XPeng is launching new models regularly, which are helping it in targeting a broader base of customers and grow its sales.

XPeng targets the mass market with products priced in the range of RMB 150,000 to RMB 400,000. That's lower than all of the models that Tesla sells in China, except the Model 3. XPeng is looking to offer some of the best features in its models, but at much lower price points than that offered by the competitors.  

The company operates 661 branded supercharging stations across China. Additionally, it has partnered with third parties, offering a network of over 200,000 chargers. Finally, the company offers its own driver-assistance system and is working to refine it continuously. All in all, XPeng seems to be in the race for the long-term. 

Should you buy XPeng stock right now?

Before deciding to invest, it is important to note some key risks associated with investing in international stocks. Apart from currency, political, and country-specific risks, XPeng investors face risks relating to concentrated voting power. XPeng's three co-founders -- Xiaopeng He, Heng Xia, and Tao He -- control 69.5% of the company's total voting power. Further, Taobao China Holding Limited, a wholly owned subsidiary of Alibaba Group, controls 14.6% of the voting power. 

Such control may negatively impact the interests of American depositary share (ADS) holders, should they conflict with the interests of those holding the majority voting power. Notably, such risks seem to be already priced in the stock, as reflected in the discounted valuation of XPeng stock compared to its U.S. peers.

XPeng stock is trading at a better price-to-forward-sales ratio than several other EV stocks such as Rivian, Lucid, or Tesla. However, XPeng stock is trading at a slightly higher ratio compared to that of Nio or Li Auto, reflecting its higher expected growth rate.

XPEV Market Cap Chart

XPEV Market Cap data by YCharts

XPeng stock's valuation seems attractive right now relative to its peers. An exciting products range, impressive sales growth, and a huge addressable market make XPeng stock appealing.

All in all, the stock looks well placed to generate market-beating returns in the long term.

Rekha Khandelwal has no position in any of the stocks mentioned. The Motley Fool owns and recommends BYD, NIO Inc., and Tesla. The Motley Fool has a disclosure policy.

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