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Over the last few weeks, we have seen some upward movement in Chinese electric vehicle (EV) stocks, especially NIO (NIO) and Xpeng Motors (XPEV), both of which have otherwise been quite beaten down. However, despite the 21% rally over the last month, XPEV is still down 43% for the year. In this article, we’ll look at the 2025 forecast for Xpeng, which is now trying to compete with BYD (BYDDY) in the budget EV market.
Let’s begin by analyzing what has driven the rise in XPEV shares over the last month.
Why Did XPEV Stock Rally in August?
Xpeng's Q2 earnings were reasonably good, and the company’s gross margins expanded to 14%. While its margins have been quite volatile, during the earnings call, the company said that it expects margins to be “stable” in the back half of the year and remain in the “mid to low-teens.”
XPEV founder and CEO He Xiaopeng buying 2 million shares of the company last month was also received positively by the markets, which sent the stock north after the news.
Late last month, Xpeng Motors launched its Mona M03 electric coupe, with the model's prices starting below $17,000. The initial response to the model was positive, and Xpeng said that it booked 10,000 orders within the first hour of the official launch. Markets also took note of the interest that buyers showed in the model, and XPEV shares rallied after the announcement.
More recently, XPEV stock rallied after NIO reported better-than-expected Q2 earnings and provided upbeat guidance. As an asset class, quite often Chinese EV stocks tend to move in tandem, and NIO’s earnings helped trigger a rally in Xpeng as well.
Xpeng 2025 Forecast
Wall Street analysts have been gradually warming up to Xpeng, and last week, JPMorgan upgraded the stock from a “neutral” to “overweight.” Of the 11 analysts covering XPEV, over 63% rate it as either a “Strong Buy” or a “Buy” – while the corresponding figure 3 months back was around 45%. XPEV’s mean target price of $12.43 is 45% higher than last week’s closing prices.
While XPEV’s deliveries so far in 2024 have been disappointing – and so has its price action – I continue to remain optimistic about the company for the following reasons.
- Xpeng's deliveries should be strong in 2025: New models, especially the Mona M03 and P7 plus sedans, should help propel Xpeng's deliveries in 2025, with JPMorgan predicting that the company will ship 300,000 cars next year – 72% higher than the expected deliveries this year. The Mona models will especially increase Xpeng's addressable market, and it will compete with market leader BYD for a piece of the budget EV market.
- International expansion: Xpeng has been expanding overseas and in Q2, its international sales surpassed 10% of its total revenues for the first time. The company expects to reach 40 markets by the end of this year, and is targeting countries like Australia and the U.K. next. On a similar note, XPEV is considering opening a plant in the E.U., which would help to blunt the tariffs that the region has imposed on Chinese EVs.
- Volkswagen partnership: The partnership with Volkswagen (VWAGY) could be a key driver for Xpeng, as the two are working to jointly develop two cars for the Chinese market by 2026. The partnership with Volkswagen could also help aid XPEV's international expansion.
- Autonomous driving: While Xpeng is believed to have among the best – if not the best – autonomous driving capabilities among Chinese EV companies, markets haven’t given it the same kind of “valuation respect” as Tesla (TSLA), whose CEO Elon Musk believes that the bulk of its valuation comes from its autonomous driving business.
Should You Buy XPEV Stock Now?
Xpeng stock can be quite volatile, as we have seen over the last year. Also, while the company tends to generate a good amount of euphoria with its announcements – like the launch of the G6 SUV and low-cost Smart Electric Platform Architecture (SEPA 2.0) platform in 2023 – it hasn’t been able to build on the initial euphoria.
However, I remain bullish on XPEV stock amid a flurry of new launches that should positively impact both its top line as well as the bottom line. Analysts expect the company’s revenues to rise almost 56% in 2025, while modeling a halving of its earnings before interest, tax, depreciation, and amortization (EBITDA) loss. From a valuation perspective, XPEV trades at 1.1x its next 12-month sales – multiples that don’t look too demanding, considering the expected growth that it brings to the table.
All of that said, 2025 will be the real year of execution for Xpeng Motors. Looking at the current valuations, markets don’t seem to be giving it much chance, which means that if the company can get good traction with its new models, while also gradually improving its margins, the stock could see much better days in 2025. The margin of error, meanwhile, is quite low - not only for XPEV, but also for other EV stocks, as investors have been quite unforgiving of companies that have slacked on execution.
On the date of publication, Mohit Oberoi had a position in: XPEV , NIO , TSLA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
