XPeng (NASDAQ:XPEV) stock recovered ground overnight after getting a five-star rating from a European safety rating agency.
The New Car Assessment Program (NCAP) gave the XPeng P7 a safety rating of 87% for an adult occupant. It was among the best performers for five-passenger family cars. Two models each from Nio (NYSE:NIO) and BYD (OTCMKTS:BYDDY) also garnered high marks.
XPEV stock was up about 2% overnight. It fell 8% on Oct. 25.
XPEV Stock: The China Challenge
XPeng said only this month that it will begin selling its cars in Germany.
Chinese electric vehicles (EVs) are not yet taking large chunks of market share in Europe. But BMW (OTCMKTS:BMWYY) CEO Oliver Zipse has called them an “imminent risk,” especially at the low end of the market.
Key to Europe’s EV market will be battery plants. About 250 are expected to open on the continent over the next 10 years. The worldwide EV battery market expects 800% growth over the next five years.
EVs are just a platform for batteries, which define their range and power. Europe recently introduced subsidies to lure more battery plants. Chinese battery makers are focused on Europe because the subsidies of the Inflation Reduction Act favor American producers.
But if build quality and low prices sell cars, there’s a lot of room for Chinese expansion. Chinese EV makers still have less than 4% of Europe’s EV market.
While the XPeng P7 is competitive, there are many models from Tesla (NASDAQ:TSLA), Volkswagen (OTCMKTS:VWAGY) and Toyota (NYSE:TM) rated just as highly by NCAP. BMW’s Zipse is especially concerned with BYD, which dominates the Chinese mid-market and threatens to do the same in Europe.
What Happens Next?
American car companies face the same challenge from BYD and Chinese battery makers that Europe does. The luxury end of our market looks saturated, so many observers call the whole market saturated. There are no plans for American companies to mass produce low-priced EVs.
As of this writing, Dana Blankenhorn 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.
