This Little-Known Chinese EV Company's Stock Price Nearly Doubled This Year. Here's Why.

In this article, we will analyze the reasons behind the stock price surge from multiple perspectives, including industry trends, competitiveness, financial performance, and funding.

● Autonomous Driving

With the development of AI, the automotive industry has made significant progress in autonomous driving technology. XPeng stands out among Chinese manufacturers in this field. Its XNGP 4.0 system achieves 97% coverage of urban roads (other brands mostly below 70%), and XPeng has gradually abandoned LiDAR, reducing the cost of intelligent driving by 30% with a pure vision solution (using only cameras), presenting a significant technological gap advantage.

In the European market, XPeng's right-hand drive version of the G6 is available for pre-sale in the UK. In the Middle East and Africa market, a breakthrough has been achieved through dealers in the UAE, with overseas sales accounting for 15% of total sales. The company's gross margin in Europe exceeds 20%, surpassing its overall gross margin.

● Diverse range of car models

XPeng has precisely targeted the 100,000 to 200,000 yuan (14,000 to 28,000 USD) market segment. In February, it delivered a total of 30,500 new vehicles, representing a year-on-year increase of 570%. This marks the fourth consecutive month that its deliveries have exceeded 30,000 units, a figure higher than other new energy vehicle brands.

The company's entry-level product, the MONA M03, has become a phenomenal bestseller. Priced from 119,800 yuan, it has continuously delivered over 15,000 units for three consecutive months. In the high-end market, the P7 series comes standard with advanced smart driving features. Within three months of its launch, over 30,000 units were delivered, diverting some customers from Tesla and Li Auto.

XPeng's self-driving R&D and data operation team exceeds 3,000 employees, twice that of NIO and four times that of Li Auto.

The company has independently developed the Turing chip, which supports the local operation of large models with 30 billion parameters, increasing computing power by 50%. The L3 level autonomous driving is planned to be implemented in the second half of 2025.

The average daily usage time of its XNGP users reaches 45 minutes, and the payment rate for the smart driving software has jumped from 5% to 25%. The training speed of XNGP is three times faster than the industry average, and the iteration cost continues to decrease. In February, the monthly active user penetration rate of XPeng's XNGP urban smart driving feature reached 86%.

Improved gross margin: Xpeng announced its Q4 2024 report on March 18th. For the full year of 2024, the company's gross margin is 14.3%, an annual increase of 12.8 percentage points. In the fourth quarter of 2024, its gross margin is 14.4%, up 8.2 percentage points from the same period in 2023, and slightly down by 0.9 percentage points from the previous quarter.

Xpeng has not yet achieved profitability, with a net loss of 5.79 billion yuan in 2024, a 44.2% decrease compared to the previous year. However, its founder He Xiaopeng expects the company to achieve profitability in the fourth quarter in 2025, and predicts that Xpeng's total sales in 2025 will more than double year-over-year. In the first two months of this year, Xpeng Motors delivered a total of 60,803 vehicles, a 375% increase year-over-year. It is estimated that the total vehicle deliveries for the first quarter of this year will be between 91,000 and 93,000 units, an increase of approximately 317.0% to 326.2% year-over-year. This implies that the sales volume in March is between 30,000 and 32,000 units, which is roughly flat compared to February, with only an increase of about 2,000 units. This guidance is rather subdued given the launch of the redesigned G6 & G9 models, leading the market to worry whether the sales momentum of the popular models P7+ and M03 can be sustained.

R&D burden alleviated: With the increase in sales volume, the research and development (R&D) costs per vehicle are also continuously decreasing. In 2024 Q4, Xpeng's per vehicle R&D cost has been reduced to below 35,000 yuan, while data from 2023 showed that Xpeng Motors' per vehicle R&D expense was 71,100 yuan.

Xpeng faces challenges such as increasingly fierce market competition. In the field of autonomous driving, Huawei's ADS 3.0 has been extended to all vehicle models, and Li Auto's AD Max 3.0 has initiated a "subscription-based" model, which could compress profit margins in the high-end market. The company relies on breaking through the 350,000 vehicle sales mark in 2025 to achieve breakeven. Besides, its gross margin remains lower than that of Nio and Li Auto.

Meanwhile, the revenue guidance for the first quarter suggests that the average price per vehicle continues to decline: the implied average price for Q1 is only 150,000 yuan, lower than 189,000 yuan in Q3 and 160,000 yuan in Q4. Considering that the proportion of the more affordably priced M03 model may continue to increase (in January and February 2025, M03 accounted for half of the sales, compared to only 42% in Q4 2024), and the discounts being offered on certain models, the downward trend in average price is understandable. Despite this, Xpeng has guided that the automotive gross margin for the first quarter will still be in the double digits, which still reflects a very strong capability in cost reduction.

Xpeng' global expansion also faces challenges: the implementation of the EU's new Battery Directive may increase export costs, and there is still a need to break through in terms of localization adaptation and brand recognition in the European market.

The rise in Xpeng's stock price this year is a result of technological parity and scale effects. In the short term, the coverage of XNGP in over 100 cities and the facelift of the G9 model by 2025 are expected to drive sales to 300,000 units. In the medium to long term, the mass production of Xpeng's humanoid robots could potentially break the valuation ceiling. If the profit commitments for 2026 are fulfilled, the valuation system could revert to a PE ratio of 20-30 times. Investors should pay attention to changes in future gross margins and the progress of overseas factory operations, and be wary of the pressure on profits from industry price wars.