In-Depth Equity Analysis: XPeng Inc. (XPEV)

In-Depth Equity Analysis: XPeng Inc. (XPEV)

XPeng: Smart EV Pioneer in China with Strong Technology Focus and Global Ambitions

Company Overview:
XPeng Motors (XPEV) was founded in 2014 and has established itself as a leading intelligent electric vehicle manufacturer in China. The company focuses on research and development, production, and sales of intelligent electric vehicles, along with providing related services. In August 2020, XPeng Motors was listed on the New York Stock Exchange (NYSE: XPEV); in July 2021, it completed a dual primary listing on the Hong Kong Stock Exchange (9868.HK).

XPeng Motors positions itself in the mid-to-high-end intelligent electric vehicle market, primarily targeting Chinese middle-class consumers with high requirements for intelligent technology and driving experience. The company employs a combined direct sales and dealership model. As of the end of 2024, XPeng has established over 1,000 sales and service points in China and is actively expanding into international markets, particularly in Europe.

Business Structure Analysis

1. Main Vehicle Series

XPeng Motors has developed a comprehensive product matrix covering multiple segments and price ranges:

• Mona Series: Positioned in the RMB 100,000-200,000 ($14,000-$28,000) price range.
  • Mona M03: A-class pure electric sedan that has achieved breakthrough success in the entry-level market with excellent spatial performance and intelligent experience, with monthly sales exceeding 15,000 units.
• P Series: Sedan/coupe series, positioned in the RMB 150,000-300,000 ($21,000-$42,000) price range.
  • P7+: C-class intelligent electric coupe launched in November 2024, positioned as "AI-defined automobile," with cumulative deliveries exceeding 30,000 units within 3 months of launch.
  • P7i: B-class intelligent electric coupe.
  • P5: A-class compact sedan (gradually being phased out).
• G Series: SUV series, positioned in the RMB 150,000-300,000 ($21,000-$42,000) price range.
  • G6: B-class mid-size SUV, recently updated for 2025, focusing on intelligent driving experience and spatial performance.
  • G9: C-class full-size SUV, comprehensively upgraded for 2025, equipped with an 800V high-voltage platform.
• X Series: Premium series, positioned above RMB 300,000 ($42,000).
  • X9: Large intelligent electric MPV, providing spacious and comfortable riding experience for family users.

2. Revenue Composition

XPeng Motors' revenue primarily comes from two segments:

• Vehicle Sales Business:
  • Q4 2024 revenue of RMB 14.67 billion ($2.05 billion), representing a year-over-year increase of 20.0%, accounting for 91% of total revenue.
  • Average selling price of approximately RMB 176,000 ($24,640) per vehicle.
  • Gross margin breaking through 10% to reach 10.0%, marking six consecutive quarters of improvement.
• Services and Other Business:
  • Q4 2024 revenue of RMB 1.43 billion ($200 million), representing a year-over-year increase of 74.4%, accounting for 9% of total revenue.
  • Mainly includes Volkswagen service revenue, software revenue, component sales, etc.
  • Gross margin as high as 59.6%, serving as an important profit source for the company.

3. Technology Pillars

XPeng Motors' core competitiveness is primarily reflected in the following technology domains:

• Intelligent Driving Technology:
  • Self-developed XPILOT intelligent driving system, with the latest version adopting a pure vision-based approach.
  • Industry-leading implementation of "parking space to parking space" full-scenario intelligent driving functionality.
  • Continuous provision of new features through OTA upgrades.
• SEPA Architecture:
  • Full-domain 800V high-voltage platform, enabling ultra-fast charging capabilities.
  • Compatible with various vehicle types with wheelbases ranging from 1,800mm to 3,200mm.
  • Integrated X Power electric drive system with excellent energy efficiency and noise reduction.
• Kunpeng Super Electric System:
  • Encompasses both pure electric and extended-range technology routes.
  • Extended-range solution based on the 800V high-voltage platform, with pure electric range of 430km and combined range exceeding 1,400km.
  • Meets diverse scenario requirements through diversified energy solutions.
• X-GPT Intelligent Cockpit:
  • Self-developed large model intelligent cockpit system.
  • Enables multi-modal natural interaction and scenario-based services.

Financial Insights:

Q4 Earnings Review

Q4 2024 Financial Performance: Revenue Reaches New High, Vehicle Gross Margin Achieves Double Digits

1. Strong Growth in Deliveries, Record-Breaking Revenue: In Q4 2024, XPeng delivered 91,507 vehicles, representing a 52.1% year-over-year increase and a remarkable 96.6% quarter-over-quarter growth, setting a new quarterly delivery record. Total revenue for the quarter reached RMB 16.11 billion ($2.27 billion), up 23.4% year-over-year and 59.4% quarter-over-quarter. Vehicle sales revenue contributed RMB 14.67 billion ($2.07 billion), increasing 20.0% year-over-year and 66.7% quarter-over-quarter, while services and other revenue reached RMB 1.43 billion ($201 million), up 74.4% year-over-year and 9.2% quarter-over-quarter.

2. Steadily Improving Gross Margin, Vehicle Business Breaks 10% Threshold: Q4 overall gross margin reached 14.4%, a significant improvement of 8.2 percentage points year-over-year, with a slight decrease of 0.9 percentage points quarter-over-quarter. The vehicle business gross margin broke through the 10% threshold for the first time, reaching 10.0%, up 6.0 percentage points year-over-year and 1.4 percentage points quarter-over-quarter, marking six consecutive quarters of improvement. Services business gross margin reached 59.6%, up 21.4 percentage points year-over-year with a slight decrease of 0.6 percentage points quarter-over-quarter. The slight quarter-over-quarter decrease in overall gross margin was primarily due to changes in business structure, with vehicle sales representing a higher proportion of total revenue.

3. Effective Cost Control, Economies of Scale Emerging: Q4 R&D expenses totaled RMB 2.01 billion ($283 million), with R&D expense ratio at 12.5%, up 2.4 percentage points year-over-year but down 3.7 percentage points quarter-over-quarter. Sales and administrative expenses were RMB 2.28 billion ($321 million), with an expense ratio of 14.1%, down 0.7 percentage points year-over-year and 2.0 percentage points quarter-over-quarter. The significant increase in sales volume effectively diluted various expense ratios.

4. Narrowing Losses, Significantly Improved Profitability: Q4 net loss was RMB 1.33 billion ($187 million), remaining flat year-over-year. However, considering the substantial increase in deliveries, the loss per vehicle narrowed significantly to approximately RMB 15,000 ($2,113). Net profit margin was -8.3%, improving by 2.1 percentage points year-over-year and significantly improving by 9.7 percentage points quarter-over-quarter.

5. Strong Cash Position, Financial Stability: As of the end of 2024, the company's cash and cash equivalents, short-term investments, and long-term deposits totaled RMB 41.96 billion ($5.91 billion), up 17.4% quarter-over-quarter, providing ample financial support for future development.

Full-Year Earnings Review：

2024 Full-Year Performance: Overall Improvement with Significantly Enhanced Profitability

For the full year of 2024, XPeng delivered a total of 190,000 vehicles, a 34.2% increase year-over-year; achieved revenue of RMB 40.87 billion ($5.76 billion), up 33.2% year-over-year; with an average selling price (ASP) of approximately RMB 189,000 ($26,630), down 4.7% year-over-year. Full-year gross margin reached 14.3%, a substantial improvement of 12.8 percentage points year-over-year; net loss attributable to shareholders was RMB 5.8 billion ($817 million), narrowing by nearly half compared to the previous year; and net profit margin was -14.2%, an improvement of 19.7 percentage points year-over-year.

2025 Outlook

1. Strong Q1 2025 Guidance: Expected delivery volume of 91,000-93,000 vehicles, representing a 317.0-326.2% year-over-year increase; expected revenue of RMB 15.0-15.7 billion ($2.11-2.21 billion), a 129.1-139.8% year-over-year increase.

2. Rich Product Pipeline: In 2025, the company will launch the new G7 model and will add range-extended versions and multiple facelift products by the end of the year, indicating a strong new vehicle cycle.

3. ASP Expected to Bottom Out and Rebound: With the launch of G7 and the delivery of G6/G9 facelift models, the product mix is expected to improve, diluting the proportion of M03, and the company's ASP is expected to bottom out and rebound starting from Q2.

4. Continuously Improving Gross Margin: Through the popularization of cost reduction solutions in replacement products, the costs of previously low-margin or even negative-margin G6/G9 models are expected to decrease significantly. The launch of the new G7 model and range-extended versions will further optimize gross margin.

5. Leading Intelligent Driving Technology: The company's intelligent driving technology continues to maintain industry-leading position, and its layout in humanoid robots and Robotaxi is also ahead of other manufacturers, laying a technological foundation for future development.

6. Accelerating International Strategy: In February 2025, the first right-hand drive model, G6, started pre-sales in the UK; the first batch of 300 X9 vehicles has been shipped overseas; in 2025, XPeng's ultra-fast charging network will first land in Southeast Asia. The overseas market is expected to become a new growth driver for the company.

XPeng is demonstrating continuous improvement in performance and significant enhancement in profitability through its strong new vehicle cycle, leading intelligent driving technology, and effective cost control. The company is expected to maintain rapid growth in 2025.

Investment Thesis:

1. Profound Organizational Restructuring with Effective Strategic Transformation

• Management Optimization with Complementary Advantages: Wang Fengying joined XPeng as President, forming a complementary management structure with He Xiaopeng. With an internet industry background, He possesses strong technical innovation genes and forward-looking vision; Wang brings over 30 years of automotive industry experience with expertise in product definition, supply chain management, and channel development. This "technology + automotive" management combination has injected new vitality into XPeng.
• Product Definition Iteration: The Mona series targets young female users, offering spacious interiors and high aesthetic appeal; P7+ precisely targets young families, focusing on comfort and intelligence, both receiving enthusiastic market response.
• Comprehensive Supply Chain Reform: The company has tackled supply chain corruption issues, restructured procurement departments, and promoted supplier streamlining and component sharing. Strategic cooperation with Volkswagen has further strengthened XPeng's supply chain management capabilities and bargaining power.
• Channel Expansion and Refined Operations: The "Jupiter Plan" has deeply restructured the sales network, phasing out inefficient direct stores while expanding the dealer system.

2. Leading in Intelligence with Prominent Value in the Autonomous Driving Track

• Nationwide Leadership in Autonomous Driving: XPeng was among the first automakers in China to launch urban NGP and the first to transition from "can drive nationwide" to "drives well nationwide."
• End-to-End Large Model Technology Iteration: In July 2024, XPeng became the second automaker globally to mass-produce end-to-end large models.
• AI Eagle Eye Cost Reduction Strategy: In August 2024, the AI Eagle Eye pure vision solution replaced LiDAR, significantly reducing autonomous driving costs, enabling models like P7+ to offer advanced autonomous driving features at lower prices.
• Accumulated Technical Barriers: The company has built a three-dimensional autonomous driving competitive advantage in algorithms, computing power, and data. Cloud computing power has reached 2.51 EFlops, the self-developed Turing chip has been successfully taped out, and the data closed-loop system supports efficient iteration.

3. Deep Strategic Cooperation with Volkswagen, Software Value Recognition

• Deepening Cooperation, Proving Technical Value: XPeng's cooperation with Volkswagen has continuously deepened since the July 2023 strategic investment, expanding to platforms, software, supply chain, and electrical/electronic architecture.
• Rapid Growth in Service Revenue with High Gross Margins: Service business gross margin approaches 60%, far exceeding automotive sales business, and constitutes an important profit source.
• Software-Defined Value Highlighted: This cooperation validates XPeng's ability to commercialize its software capabilities in electrical/electronic architecture and intelligent driving, breaking the traditional "hardware profit" model and allowing XPeng to share in greater value chain benefits.

4. Accelerated Internationalization Strategy, Opening New Growth Spaces

• Steady Expansion in European Markets: XPeng has established sales networks in Norway, Denmark, Sweden, the Netherlands and other European countries, delivering over 10,000 vehicles in the European market in 2024. In February 2025, the first right-hand drive model G6 began pre-sales in the UK, laying the foundation for right-hand drive market entry.
• Clear Long-term Strategic Planning: XPeng has explicitly set a goal for overseas market deliveries to account for over 50% in the next decade, demonstrating the company's long-term commitment to international markets. Internationalization not only diversifies China market competition risks but also brings higher gross margins, providing sustained growth momentum.

5. Future-Oriented Diversification, Creating a Second Growth Curve

• Early Deployment in Humanoid Robot Track: XPeng's deployment in the humanoid robot field leads among domestic automakers, creating synergies with its automotive business. The company's technological accumulation in biomechanics, control systems, and perception algorithms can be directly applied to robot development, sharing R&D costs.
• Low-Altitude Aircraft Exploring Blue Ocean Markets: XPeng's flying car project has developed rapidly, completing multiple flight tests. The flying car market has vast potential, with market size expected to reach $1 trillion by 2035. XPeng's early deployment is likely to bring a second growth curve for the company in the future.

Full-Stack AI Large Model Strategy: XPeng is transitioning from an intelligent automobile company to a global AI company, having deployed chips, algorithms, large models, and application ecosystems. In the future, XPeng is expected to leverage AI technology to connect multiple product lines, forming an AI-empowered product matrix from automobiles to robots to aircraft, creating more value for shareholders.

Risk Factors:

1. Macroeconomic Slowdown Risk: Economic downturns may adversely impact consumer purchasing power and vehicle demand. The premium segment that XPeng targets could be particularly vulnerable to economic fluctuations and consumer confidence shifts.

2. Intensified EV Competition: China's EV market is experiencing intensifying competition with over 100 brands competing. Price wars could intensify, potentially pressuring XPeng's margins and sales volume, especially as traditional automakers accelerate their EV transitions.

3. Supply Chain Disruptions: Potential shortages of critical components such as semiconductors, battery materials, or rare earth elements could impact production schedules and increase costs.

4. Technology Route Uncertainty: XPeng's bet on pure vision autonomous driving without LiDAR represents a specific technology approach. If this route proves less effective than competing solutions, it could compromise the company's competitive position.

5. R&D Investment Recovery Risk: Substantial investments in autonomous driving, flying vehicles, and robotics may not generate expected returns on investment, potentially straining financial resources.

Research Report Appendix

Company Concept: 

XPeng Motors (XPEV) was founded in 2014 and has established itself as a leading intelligent electric vehicle manufacturer in China. The company focuses on research and development, production, and sales of intelligent electric vehicles, along with providing related services. 

Model Explanation:

The model primarily evaluates companies and industries across five dimensions: growth ability, valuation attractiveness, stability, risk resistance ability, and theme strength. Each dimension is scored from 1-5, with 1 being the lowest and 5 the highest. Overall, higher scores indicate stronger fundamentals. For each dimension, a multi-factor model will be constructed based on industry and historical data of selected stocks, and a quantitative model will be used to automatically score each dimension.

Here are the dimensions explained:

• Growth Ability: Measures future performance potential; higher growth rates yield higher scores.
• Valuation Attractiveness: Assesses stock valuation; lower valuations earn higher scores.
• Stability: Evaluates the consistency of profit generation; greater stability means higher scores.
• Risk Resistance: Gauges the capacity to endure macroeconomic changes; better risk resistance leads to higher scores.
• Theme Strength: Rates market favor for the stock in the short term; increased favor results in higher scores.

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