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XPEV stock alert: Xpeng spooks investors with its EV outlook

Source: Koshiro K / Shutterstock

Chinese electric vehicle (EV) manufacturer Xpeng (NYSE:XPEV) has just published disappointing quarterly results and a gloomy outlook. However, some investors were not shaken by the numbers.

XPEV stock rose 23 cents yesterday to $8.33 per share. It also rose overnight, even after reporting narrowed margins and a widened loss. Looking ahead, the company said it will undertake cost-cutting measures. Shares opened today at around $8.50 per share.

For the fourth quarter, Xpeng said it lost $388 million, or 20 cents per share, on revenue of $745 million. Since each American Depositary share of the company is worth two shares, the loss amounted to 40 cents per ADS.

Stock XPEV: In search of an affordable price

Xpeng and its rivals Nio (NYSE:NIO) And Li-Auto (NASDAQ:LI) often trade in unison, making luxury electric vehicles compete with players like You’re here (NASDAQ:TSLA). They often trade in reaction to this.

However, the companies are not the same. Based in Shanghai, Nio has a strong focus on exporting its battery swap technology, leasing cars in Europe. Meanwhile, Beijing-based Li Auto has a strong focus on the domestic market in China. Finally, Xpeng — based in Guangzhou — is close to Ali Baba (NYSE:BABA), which holds a stake in the company.

Sure, Xpeng expects to ship 18,000-19,000 cars this quarter, down from over 22,000 last quarter and down about 45% year-over-year (YOY). In January, however, the company appointed Wang Fengying as chairman. Fengying will help refocus Xpeng on the middle market where sales have been growing, led by names like BYD (OTCMKTS:BYDDY).

I’ve been writing for years about the shift to electric vehicle affordability, first in the Chinese market and then globally. Luxury vehicles represent only a small part of the total automotive market. More people own Chevrolets than Cadillacs.

A “mid-market” electric would have a smaller battery, shorter range and fewer chips than a typical Tesla. It would look more like General Motors’ (NYSE:GM) Chevy Bolt, which is priced around $27,000. GM is also a joint venture partner in the company that makes the $5,000 Hong Guang Mini EV, one of the best-selling electric vehicles in China.

What happens next?

So where is Xpeng headed? The hope of the company’s strategic change kept XPEV’s value high. If the EV maker can execute its plan, it won’t look like Tesla in a few years.

As of the date of publication, Dana Blankenhorn has held a long-standing position at BABA. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.


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