XPeng $XPeng Inc.(XPEV)$ , the 'Tesla$Tesla Motors(TSLA)$ of China', is charging ahead with growth, with another month of record deliveries on a sharp m/m jump. The manufacturer has crested above NIO in terms of YTD deliveries as it extends its monthly lead, and is poised for another year of strong growth ahead. Expansion plans look well managed, and the new G9 highlights XPeng's lead in tech. However, given the heightened political risk stemming from Chinese regulatory pressure on DiDi (DIDI), XPeng's previous bullish rating is cut to neutral.
2022 Outlook
Even with last November's performance above XPeng's targeted year-end volumes, and seasonal strength persisting, Q4's delivery projection is held at 35,000 units, in line with management's forecast from Q3's earnings; however, that seems to be conservative, guiding a ~10,000 unit month for December as over 25,000 units have already been delivered in Q4 so far. As such, an original prediction for >40,000 units could be more reflective of XPeng's potential for Q4 should December's strengths match November's.
Moving through to 2022, XPeng has some key advantages that can aid its growth and solidify its position atop the technological innovation leaderboard in China. XPeng has announced some more details about its supercharging upgrades, first unveiled at Tech Day in October. The 800V supercharger, with a peak current of 600A, can charge a vehicle to 200km range in just 5 minutes, and its 480kWh supercharging piles can charge a vehicle from 10% to 80% in just 12 minutes - this is quicker than Tesla's (TSLA) V3 supercharger, which is capable of charging 75 miles (120 km) in 5 minutes.
XPeng is working to significantly boost capacity levels and "increase [its] product penetration in [the] target market with price ranges between RMB 150,000 to RMB 400,000," with new factories and the G9 slated for the year. Zhaoqing and Guangzhou factories are expected to be operational by the latter half of 2022, which can pave the way for monthly production volumes to potentially double to 30,000 units. This puts XPeng on a 350,000-400,000 annual capacity trajectory, allowing the manufacturer to maintain triple-digit growth rates into this year and possibly even 2023.
XPeng continues to march ahead in tech, no doubt, but the company's recent unveiling of the G9 highlights just how strong its tech is. The G9 is equipped with XPeng's next-gen software and hardware - XPILOT 4.0, capable of delivering up to level 4 autonomous driving, and X-EEA 3.0, XPeng's advanced electric and electronic architecture enabling high performance and quick OTA upgrades as well as that rapid charging ability. The G9's price has not been announced, but could be in the RMB300,000 to RMB 350,000 range, as the vehicle is part of the target market expansion plan. Deliveries are expected by Q3 2022.
In the early part of the year, XPeng could see some relatively weaker margins, passing over from Q4 - with product mix shift seeing lower P7 contribution, from 77% to ~55%, projections imply a near term margin impact. Increased expenses in R&D, factory construction and model expansion could keep margins slightly weaker in 1H.
One major risk to watch is China's political de-listing risk, which surfaced Thursday night with the country pushing DiDi to work on delisting from the NYSE to pursue a Hong Kong listing. XPeng already has a dual NYSE-HK listing structure, unlike peer NIO, but still has faced a sharp selloff in the wake of a broader market selloff and such political risks. As such, even in the wake of strong growth, political moves can undermine that and adversely impact shares.
Yet XPeng looks better positioned than NIO$NIO Inc.(NIO)$ overall - the manufacturer has just crested above NIO in terms of deliveries, and is taking a more manageable approach to expansion plans, compared to NIO's risky aggressive expansion goals. While there still remains some execution risk moving in to 2H 2022, XPeng's targeted plan does not have as many moving parts as NIO's, as the two are set to take steep competition into next year with XPeng's 225,000 unit forecast pushing farther ahead of NIO's 180,000 unit early projection.
Overall, XPeng continues to trailblaze with its growth and with its vehicle lineup, moving ahead of peers on a technological standpoint with XPILOT 4.0 and recent charging times. Political risk does weigh heavy on shares, playing a role in the ~20% decline in the past week, while other risks such as competitive forces from expansion internationally and into other price segments and potential margin weakness remain. Although XPeng has outperformed relative to NIO and has triple-digit growth rates and attractive scaling of deliveries, shares are cut to neutral due to the political risk overhang.
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