What happened
Shares of Chinese electric vehicle (EV) makers were soaring Monday morning after one company made a presentation over the weekend detailing the future of EV manufacturing at lower costs. XPeng (XPEV -8.84%) made the news, and its stock was higher by 13.1% at 11:05 a.m. ET after spiking more than 15% earlier.
NIO (NIO -6.33%) and Li Auto (LI 0.22%) are two other Chinese EV makers that are also higher on the news. NIO and Li shares had moved up by 6% and 5.2%, respectively, at that time.
So what
Yesterday, XPeng unveiled its latest vehicle production platform, with company chairman and CEO He Xiaopeng saying it will deliver "faster software upgrades, stunning cost savings, and elevated product experience." Investors are clearly focusing on the potential for cost savings as competition in China and elsewhere grows. Tesla has been cutting vehicle prices, making it more difficult for early-stage companies like XPeng, NIO, and Li to reach profitability.
Now what
Xpeng said its SEPA2.0, or Smart Electric Platform Architecture, will be the basis for developing and improving autonomous driving software as well as other engineering uses. The company said the technology will decrease research and development (R&D) cycles by 20% for new vehicle models. That will help it bring new models to market sooner and optimize costs.
Importantly, the company said the architecture is adaptable and able to support the manufacturing of various vehicle types including sedans, SUVs, and pickup trucks. Investors today seem to believe that the other Chinese EV companies will also benefit from this platform or similar ones.
The benefits could help these companies compete with the likes of Tesla. For example, improved die-casting technology will aid in mass production by simplifying fabrication of vehicle bodies. XPeng said the smart manufacturing system will be implemented at several of its facilities by 2025.
The technology isn't limited to manufacturing and production. The company said it will provide solutions to improve battery-charging efficiency and to grow its network of fast chargers.
Investors have shown disappointment in the progress of seemingly promising EV makers in China. NIO's stock, for example, has declined by 50% in the past year. That's because estimates for achieving profitability have not been met. Production volumes have been affected by supply chain problems and COVID-19-related lockdowns in the past 12 months.
At a time when those headwinds should be abating, an opportunity to improve efficiencies and lower costs might just be what investors want to see. That said, these EV makers will have to prove they can turn a profit before the stocks will have any long-term catalysts. But today it seems some potentially good news has investors deciding to take a position.