Although the electric vehicle (EV) industry has become highly competitive, Xpeng (NYSE: XPEV) has managed to become one of the few companies in the space that are truly thriving.
While Xpeng stock traded sideways in the first half of 2024, it mounted an impressive rally in late August. Despite high levels of volatility, a clear uptrend has emerged. In the last week, the price of XPEV shares has surged by 6.31%, up to $17.23 at press time, bringing year-to-date (YTD) returns up to 45.64%.
Late January saw several key developments. The EV business signed memoranda of understanding (MOU) with Volkswagen and British Petroleum (NYSE: BP). Both accomplished the same goal — charger cross-compatibility. He Xiaopeng, the company’s chief executive officer (CEO) also announced ambitious expansion plans.
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This recent surge was caused by quite a bullish development on the domestic front. On January 31, the carmaker released its vehicle delivery results for the month — and the markets were obviously well pleased with what was on display.
Xpeng overtakes key rival for the first time since 2022
During the month of January, Xpeng delivered 30,350 vehicles. This marked the third consecutive month where deliveries surpassed the 30,000 mark. In addition, the figure represents enviable growth — 268% year-over-year (YoY), to be exact.
On its own, this would still merit a surge for Xpeng stock — but taking a step back and looking at the wider context can clue us in as to why markets reacted so strongly.
January marked the first time since September of 2022 — 2 years and 4 months ago, that Xpeng’s deliveries overtook those of one of its primary rivals — Li Auto (NASDAQ: LI). In contrast, Li delivered 29,927 vehicles — marking a 3.97% YoY decline.
As a result, LI stock plummeted by 5%, down from $24.11 to $22.88. By the time of publication, the price of LI shares had risen to $24.73, marking a 3.07% increase on a YTD basis.
Strength in domestic markets is, understandably, crucial for the future prospects of Chinese EV companies. The point is all the more important in an atmosphere that is dominated by the imposition of tariffs on China by Western countries and vice versa — and an increasingly likely trade war between the United States and China.
With that being said, the strong moves to the upside seen since January do present an issue regarding valuation. Investors looking for a more attractive entry point to go long on Xpeng stock should keep an eye out for March 18, when the company will release its next quarterly report. The Chinese auto market is highly seasonal — so the stock could experience a pullback in Q1.
Featured image via Shutterstock
