For 2020, the global sales of electric vehicles (EVs) were up 105% year-over-year (YOY). More specifically, Chinese EV sales increased by 12% while European sales increased by 264%. In fact, China remains the largest EV market in the world, making up about 50% of total sales. Cashing in on that rising demand, Xpeng (NYSE:XPEV) has now gained a strong foothold in the industry. Since surpassing $70 in November, Xpeng stock has been relatively volatile and now trades at roughly $47 today.
According to Seeking Alpha, retail sales of passenger cars in China rose over 25% YOY and hit almost 2.2 million vehicles. That rise will certainly boost more EV sales, as the country cements itself as a hotspot of the industry. However, other countries are not far behind. EV stocks have enjoyed a terrific 2020 despite the pandemic and are poised for growth across the globe in the new year.
A strong competitor to both Nio (NYSE:NIO) and Tesla (NASDAQ:TSLA), Xpeng is definitely a long-term investment. The company has impressive delivery numbers and is making strong moves into the European market. So, let’s dig deeper into what XPEV is doing right.
Xpeng Stock and a Well-Timed Entry into Europe
In a previous article, I mentioned that Xpeng had shipped 100 of its G3 cars to Norway back in December. Now, the company has started the new year with a bang, shipping a second delivery of SUVs to the country. Of course, that’s great news. But you may being wondering: why Norway?
Xpeng is building out its market in Europe. Due to favorable government policies, Norway has a high rate of EV ownership in the world. So, the EV maker is making smart moves — it’s right where all the action is.
But that’s not all. According to FleetEurope, the U.K. saw EVs rise “from 3% in 2019 to 10% in 2020, and they’re predicted to outsell diesels in 2021.” In Norway, electric car registrations stood at 42% in 2019 and climbed to 54% the following year. In fact, Norway is the first country to have EVs account for more than half of new registrations. All in all, Norway has a solid EV promotion policy that’s led to boosted demand and the rest of Europe is following suit.
So, XPEV has recognized a huge, growing market that it will be able to cater to moving forward. That’s nothing but great news for Xpeng stock.
How Xpeng Is Able to Deliver
What makes the cars behind Xpeng stock so appealing? For many, the price.
For example, XPEV’s G3 is affordable when compared to other EVs in the industry — at $41,000, the car offers decent range and some of the latest technology. So, despite putting out relatively small shipments, the company has been able to make a good impression on the growing market in Europe. And we could see even more shipments of SUVs to Norway and elsewhere through the year.
Xpeng’s rivals Li Auto (NASDAQ:LI) and Nio, meanwhile, have yet to make a mark in the Europe. So, this EV maker has an early mover advantage.
Finally, the company reported its January delivery numbers and they were spectacular. Deliveries increased 470% YOY for the month, up to 6,015 units. According to XPEV, this was even the “third consecutive month of record-breaking delivery.” Plus, as economies in Europe and China move back to normalcy, those numbers are only going to rise. That uptick in demand will lead to better margins for the company.
Right now, Xpeng stock trades at about $47 and has a market capitalization of $33.6 billion. I remain convinced that the company’s positive outlook justifies the current valuation. More specifically, its competitive edge in the EV industry as well as its recent entry into Europe will allow XPEV to meet expectations.
The only direction that the EV market is going is upwards. The same goes for this stock. So, the recent dip in XPEV is an opportunity to buy and add the name to your portfolio.
Needless to say, I’m as bullish on the stock as I was last month. Xpeng could even be back above $70 in the coming months.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.