The electric vehicle (EV) market is proving highly competitive, which could be problematic for XPeng (NYSE:XPEV). Most recently, an analyst issued a warning about the competition as it relates to this Chinese EV maker. Financial traders responded quickly to the news; XPEV stock is down almost 4% as of this writing.
Specifically, Baird analyst Eunice Lee expressed concerns that the company “will face rising competition that could impact sales for P7, G9, G3i, and P5 models.” Undoubtedly, Lee is referring to rival EV makers like Nio (NYSE:NIO) and Tesla (NASDAQ:TSLA).
Reportedly, Lee cited “lower-than-expected volume” — referring to EV delivery volume, presumably — and the “pricing war that is breaking out” in the industry as factors that are “expected to impact margins negatively.” As a result, the analyst downgraded shares of XPEV stock from “outperform” to “market perform.”
What’s Happening With XPEV Stock?
XPEV stock fell on the news, currently trading near the $9.50 level. Interestingly, this is lower than the reduced price target of $12 that Baird assigned to shares.
Does this mean that Baird expects XPEV to gain value over the next year? It’s possible, as analysts give XPeng “credit for its organizational restructuring and cost reduction efforts.”
On the other hand, these efforts may be the company’s response to fourth-quarter results that missed Wall Street’s expectations. Besides, Baird seems to believe that the EV maker’s restructuring may not have its intended effect “until late in 2023 or 2024.”
The problem is, investors aren’t necessarily willing to wait that long for XPeng’s turnaround efforts to yield results.
It will be interesting to see how this automaker executes its restructuring — and how it chooses to deal with its bigger, more famous peers. Shares have lost significant value over the past year. Plus, competition from Tesla and others won’t let up anytime soon. Hence, many of today’s XPEV stock traders are heeding Lee’s concerns and promptly selling shares.
On the date of publication, David Moadel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.