Xpeng Stock (XPEV) Splutters as Chinese Discount Drive Threatens to Bash Earnings

Shares in Chinese EV maker XPeng (XPEV) reversed today on fears that a domestic discount war could batter its earnings.

Price Competition

According to a new report from U.S. bank JP Morgan (JPM) Chinese carmakers, for both EV and gas-powered vehicles, offered a record high 16.8% average discount last month to sustain their sales growth, from 16.3% the previous month. This compares with an average discount in 2024 of 8.3%, according to the China Passenger Car Association.

JP Morgan warned that this battle to the bottom undermined EV makers’ efforts to stem losses.

XPeng stock, which in the fourth quarter of 2024 reported an earnings per share of -$0.23, dropped 0.5% in pre-market trading. It reports Q1 figures on May 21.

It has seen a huge sales boost in recent weeks, but this may have come at a price.

“Price reflects the balance between supply and demand,” said Nick Lai, head of auto research in Asia-Pacific at JPMorgan. “Price competition has turned fiercer this year. Unfortunately, we have not seen a jump in electric vehicle demand so far.”

Consolidation Ahead

According to the South China Morning Post, of China’s around 50 EV manufacturers, only three are known to be profitable. These are BYD (BYDDY), Li Auto (LI) and Seres.

Others like XPeng are dragged back by high development and marketing costs. However, analysts say that if they choose to exit the price war then their sales will decline.

Analysts believe the highly competitive market is ripe for consolidation with smaller players either being forced out of the market or swallowed up by larger rivals.

There is still a strong domestic market to play for however with JP Morgan forecasting that Chinese EVs will make up 80% of the mainland’s car market by 2030, up from around 43% today.

Increasingly companies are also looking outside of China for new sales. In the first four months of this year Chinese EVs made up around a third of China’s total vehicle exports, up from around 25% two years ago.

Is XPEV a Good Stock to Buy Now?

On TipRanks, XPEV has a Moderate Buy consensus based on 6 Buy, 4 Hold and 1 Sell rating. Its highest price target is $32. XPEV stock’s consensus price target is $24.69 implying an 23.57% upside.

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