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New factory plans boost XPeng’s share price

XPeng’s [XPEV] share price has struggled so far in 2021, with its 12 April close of $33.99 representing a 20.6% year-to-date fall. Despite the stock gaining 31.7% to $56.39 on 22 January, XPeng’s share price dropped 52.3% in the following weeks, to close at $26.92 on 8 March.

The electric vehicle (EV) manufacturer’s stock recovered to $37.88 by 22 March but, on the whole, XPeng’s share price had a challenging first quarter, especially given the seasonal decline in sales in February around the Chinese New Year.

As of 12 April, XPeng’s share price had climbed 60.2% since it listed on 27 August last year. It has fallen 54.4% from an intraday high of $74.49 on 24 November.

The chips are down

In order to keep pace with China’s rapidly expanding demand for EVs, XPeng has announced the opening of a new production facility in Wuhan. This will be the company’s third base in the city, Bloomberg reported.

China broke its EV purchasing record last year, with over 1.3 million units sold, but Bloomberg Intelligence analysts believe the pace of growth could accelerate further this year, with a March report forecasting EV sales growth of 54% in 2021 compared to 24% in 2020.

According to the publication, the new Wuhan plant and XPeng’s second facility in Guangzhou could triple the company’s output capacity. After a slump in performance following the coronavirus pandemic's outbreak last year, sales have already increased 487% year-over-year to 13,340 units in the first quarter of 2021.

487%

XPeng's YoY sales increase Q1 21

China’s 2020 EV sales represent 41% of the global market, while European sales account for a further 42%, according to a February report from Canalys. The report also showed that demand for EVs had grown faster outside of China, with sales increasing 39% globally compared to 8% in China last year.

Nevertheless, the amount of growth predicted for China’s EV market in 2021 as well as the massive portion of the market for which China already accounts, make it a potentially crucial market for EV firms to take control of.

While still trailing NIO [NIO] in total deliveries, XPeng overtook Li Auto [LI] in the first quarter, according to Seeking Alpha. Despite its poor performance in February, with 2,223 deliveries, XPeng posted a record first quarter performance after a strong comeback in March.

A global automobile chip shortage has stalled production for car companies, with EV manufacturers particularly affected due to greater demand. In response, XPeng appears to be gearing up to produce its own autonomous driving chips, according to a report by TipRanks that referenced Chinese news outlet 36Kr.

XPeng’s announcement about building a third plant on 8 April saw a 4% jump in its stock.

 

Electric KARS

The burgeoning EV market in China and the rest of the world has led to an increase in EV-focused ETFs. XPeng was the 24th largest holding in the KraneShares Electric Vehicles & Future Mobility ETF [KARS], with a 1.44% weighting in the fund’s assets as of 12 April.

Its rival NIO appears further up the list, with a 2.96% weighting. A feature of the fund is its exposure to mainland China-listed equities, reflected in the inclusion of prominent Chinese companies, such as Baidu [BIDU], BYD [1211.HK] and Kuang-Chi Technologies [2625.SZSE]. The KraneShares Electric Vehicles & Future Mobility ETF had gained 5% in the year to date (through 12 April) and was up 108% over the past 12 months.

NIO also appears in both the Global X Autonomous & Electric Vehicles ETF [DRIV] and the SPDR S&P Kensho Smart Mobility ETF [HAIL], where it accounts for 1.11% and 1.4%, respectively, of the funds’ values (as of 12 April).

The Global X Autonomous & Electric Vehicles ETF was up 13.6% in the year to date (through 12 April), on top of gains of 129.2% over the past 12 months. Meanwhile, the SPDR S&P Kensho Smart Mobility ETF had grown 11.9% so far in 2021 (through 12 April) and 171.1% over the past 12 months.

Despite a challenging Q4 2020, which saw greater-than-expected losses of RMB0.53 per share, XPeng is still favoured by analysts. Ming Hsun Lee, an equity research analyst at Bank of America (BofA), maintained a buy rating on XPeng with a $53.10 price target based on its impressive March delivery numbers, which beat BofA’s own forecast by 7%, according to Benzinga.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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