business

Why is Xpeng (XPEV) stock down 9% today?


Source: shutterstock.com/helloabc

Xpeng (NYSE:XPEV) the stock is down more than 9% today in premarket trading on growing concerns about economic growth in China amid ongoing Covid-19 lockdown measures.

XPEV stock has trended lower in recent days for a host of reasons, including growing concerns about the Chinese economy. Chinese President Xi Jinping’s confirmation last weekend of a third term also raised concerns about possible crackdowns on listed companies in the country of 1.4 billion people.

So far this year, XPEV stock is down 85% to trade at $7.36 on the New York Stock Exchange.

What happened

The latest media reports out of China indicate that millions of people in China across dozens of cities are again locked down by Covid-19 as the country pursues its “zero-Covid” policy. According to reports from BBC Newssome 800,000 people in the city of Wuhan, where Covid-19 was first detected, are back in lockdown to prevent the spread of the deadly respiratory disease.

Separately, Reuters reports that more than 200 million people across China are currently stranded by Covid-19, accounting for nearly a quarter of China’s gross domestic product (GDP). Earlier this month, President Xi said there would be no easing of the zero-Covid policy this fall and winter, calling it “a people’s war to stop the spread of the virus”.

why is it important

For companies such as Xpeng, the new shutdowns are expected to impact their manufacturing and sales, with a negative impact on current and future earnings. This prospect worries investors and presses the “sell” button on XPEV stock. The Chinese electric vehicle (EV) maker’s stock has fallen sharply in recent days, dropping as much as 11% on Oct. 26 amid heightened investor concerns about economic and political stability in China.

Ironically, the drop in XPEV stock comes at a time when the company is introducing new technologies. Earlier this week, the Guangzhou, China-based company publicly showed off a prototype flying car, along with some new robots. The new products were not enough for Xpeng to overcome concerns about the broader macroeconomic headwinds China faces.

What’s next for XPEV Stock

XPEV stock continues to fall and it’s unclear when investor sentiment toward the company will improve. The key will be for investors to regain some confidence in China’s political leadership and in the country’s economy. Until that happens, investors should expect shares of Xpeng and other Chinese stocks to continue falling.

At the date of publication, Joel Baglole did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a reporter for the Wall Street Journal and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

InvestorPlace

Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
Back to top button