Xpeng and the EV Market
The electric vehicle (EV) market has been in the news for last few years not only because of the stellar stock performance of Tesla but also the increasing adoption of the EV by the customers. When it comes to 2020, the EV stocks did have an unprecedented run and most of the companies more than doubled their market cap during this period.
One company that has made it big into this space is Xpeng Inc. This is a Chinese company set up by He Xiaopeng and is giving tough fight to Tesla in China. Xianpeng sold his internet company (UC browser) for billions of dollars before entering the challenging electric vehicle start up space. The big backers like Alibaba, Sequoia Capital helped Xpeng get an early start in the electric car race in China. They pumped in funding and helped by providing their expertise.
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China sells more than half of all the EVs sold around the World and is a key market for all the leading EV players including Tesla. Xpeng’s rivals in China include established automakers such as BYD Co. backed by Warren Buffet and the start-up NIO Inc. Also, it faces the most challenge from Tesla which is the front runner in the EV race.
After the listing in NYSE this seven-year-old company’s market capitalisation reached nearly US$25 billion in April 2021. XPENG has some decent EV models in its portfolio. P7 is the second model of the company and it’s a four-door electric sedan, premiered at the 2019 Auto Shanghai show. With the price of Xpeng’s cars almost half price of the Tesla ones, Xpeng is all set to capture the cost sensitive customers.
Xpeng Inc focuses on autonomous driving, artificial intelligence, and internet connectivity to scale it to newer heights. The biggest challenge for Xpeng Inc will be to educate customers, and Tesla may play a major role in that and to help build this segment.
Xpeng’s Top Competitors
NIO: Established in the year 2014, NIO manufactures premium electric vehicles for the international market. NIO delivered more than 40,000 cars in 2020 and witnessed almost 111% of sales surge. At the same time, it’s share price climbed over 1,000% in 2020.
BYD: BYD Company is one of the world’s fastest-growing auto firms and is already a giant in China. The company is already the world’s largest producer of battery-powered vehicles. This Warren Buffet backed company is one of the biggest competitors of XPEV.
Tesla: Tesla has the first mover advantage as Tesla has been around the EV industry a lot longer than its competitors. It is estimated that Tesla has amassed roughly 2 billion miles of data through its Autopilot driver-assist feature as is going to use the data to be a front runner in the industry. Also, the segment is pretty much defined by Tesla and that is going to be the biggest strength for Tesla.
Other Competition
Also, it faces tough competition from traditional car manufacturers as they focus on the EV space and make it mainstream production for their company. Volkswagen has recently committed to spending €73 billion on digital and electric vehicle technologies over the next 5 years. Volkswagen aims to produce 1.5 million electric vehicles by 2025 and hence this traditional auto maker is going to be a key competitor of XPEV.
In Summary
XPEV has a market cap of $24.4B which may not be huge in comparison to Tesla but it has improved its market share especially in China by giving tough competition to TESLA. As the EV market is in an investment phase now, both the operating margin and profit margin is in negative territory for this stock. XPEV had stellar revenue in the trailing twelve months period as the revenue touched close to $6B.
XPEV is an amazing company and going to be a key player in the industry as they would be pioneer of some of the emerging technologies. Also it is one of the front runners to use AI in this space. Hence it is worth to keep an eye on this exciting company and can be invested for long term.
