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Tue, June 6 at 7:00PM ET

Why Does Xpeng (XPEV) Stock Continue to Fall?

  • Xpeng (XPEV) remains the weakest of China’s EV stocks trading in New York.
  • The company continues to grow and is tied closely to Alibaba (BABA).
  • A bet on Xpeng is a bet that China’s economy will recover.
XPEV stock - Why Does Xpeng (XPEV) Stock Continue to Fall?

Source: Koshiro K / Shutterstock

Xpeng (NASDAQ:XPEV) stock continued to fall despite launching a new SUV and China’s expansion of tax credits for the electric car company’s buyers. It’s down 9% since trading opened on Sept. 29, opening at about $12.50 per share, a market capitalization of about $10.5 billion.

The stock has been much weaker in 2022 than its rivals in the high-end Chinese electric vehicle (EV) market, Nio (NYSE:NIO) and Li Auto (NASDAQ:LI). A mini rally early in the week seems to have fizzled out.

While the company’s business is continuing to grow, concerns are also growing about China’s economy and the falling yuan, now trading at 7.14 to the dollar. It was at 6.36 in January.

Can XPEV Stock Succeed?

Xpeng said it delivered 9,578 cars in August, mostly sports sedans. That’s up 33% from a year earlier.

The company continues to lose money, however. It lost $448 million under the current exchange rate in the second quarter, on revenue of about $1.23 billion.

Concerns continue to increase about Covid-19 lockdowns and the health of the Chinese economy. There is also uncertainty over next month’s Communist Party Congress. President Xi Jinping will get a new five-year term in power. If market-oriented Wang Yang is named premier, there is speculation markets could rise.

Xpeng is tied to Alibaba Group Holding (NASDAQ:BABA), which owns 12% of the company and is working with it on autonomous driving. The two have a semi-autonomous system for urban environments meant to rival Tesla (NASDAQ:TSLA). Alibaba has been a particular target of Xi’s tech crackdown and its stock is down 32% this year.

Xpeng got a boost recently when founder He Xiaopeng bought 2.2 million of the company’s American Depository Receipts (ADRs) at $13.28. Analysts at TipRanks remain bullish on the stock, with nine of 12 rating it a “buy” and an average price target of over $44.

What Happens Next?

Buying any Chinese stock is a bet that China’s economy is near its lows and will strengthen after the party congress, when political pressure goes down and economic pressure goes up.

Xpeng is the weakest of the three Chinese EV stocks trading in the U.S. If you believe the strong China thesis, it’s most likely to deliver outsized gains.

On the date of publication, Dana Blankenhorn held a long position in BABA. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.

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