XPeng (NYSE:XPEV) is a Guangzhou, China based electric vehicle company that was founded back in 2014 by two former senior executives from automaker GAC Group. The two teamed with current chairman and former AliBaba (NYSE:BABA) executive, He Xiaopeng, for whom the company is named. AliBaba is a major investor in XPeng as the eCommerce conglomerate is believed to own just shy of 15% of the company, a similar ownership structure to AliBaba rival Tencent’s (OTC:TCEHY) stake in Nio (NYSE:NIO). Learn more
XPeng’s stock debuted on the New York Stock Exchange in August of 2020, at the height of the electric vehicle sector euphoria on Wall Street. Shares gained over 40% on the first trading day, and surged as high as $74.49 per share in November. Currently, XPeng has corrected and trades around the $25.00 range, which gives the company a market cap of $20 billion USD. Here’s a look at how XPeng could be as a long term investment.
The Bearish Case: Competition is fierce in an industry that already produces low margins and a need to constantly be innovating. We already mentioned Nio, but there are also other China-based companies like Li Auto (NASDAQ:LI) and Warren Buffet backed BYD Company (OTC:BYDDY). In addition to these, industry leader Tesla (NASDAQ:TSLA) already has a strong brand presence in China, and German automaker Volkswagen has also announced its plans to enter the Chinese market. In terms of its stock, XPeng trades at a higher valuation than its rivals, and has consistently been out-delivered by Nio and Tesla. XPeng is missing an intangible that sets it apart: Tesla has its strong global brand and Nio has the innovative battery swap service and has rapidly grown its charging infrastructure all over China. Sure, XPeng has expanded into Europe, but so has Nio, Tesla, and of course, Volkswagen, amongst others.