Chinese EV maker Xpeng set to extend 50 per cent share-price surge thanks to new SUV, overseas expansion: Goldman Sachs

The US investment bank set a share-price target of HK$70, implying a 17.4 per cent gain from Xpeng’s Wednesday close
Shares of Xpeng will be underpinned by its competitive new G6 model and a resilient outlook for overseas growth, analyst says

Electric & new energy vehicles

Zhang Shidongin ShanghaiandDaniel Renin Shanghai

Published: 6:30pm, 12 Jul 2023

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Chinese electric-vehicle maker Xpeng is set to extend its more than 50 per cent stock gain this year, according to Goldman Sachs, which bets the stock still has room to run thanks to a well-received new sport-utility vehicle (SUV) and a stronger footing in its overseas business.

The US investment bank set a price target of HK$70 for the Guangzhou-based electric car company and rated the stock “buy” in relaunched coverage of Chinese carmakers by its analyst Tina Hou. That implies a 17.4 per cent gain from Xpeng’s close of HK$59.60 on Wednesday.

Shares of Xpeng will be underpinned by its competitive new G6 model and a resilient outlook for its overseas growth, Hou said in a report.

“Strong sales of Xpeng’s G6 heightened hopes for a big improvement in its performance,” said Gao Shen, an independent analyst in Shanghai. “Xpeng’s new architecture and autonomous driving technology proved to be well received by Chinese motorists, which bodes well for its models in the pipeline.”

A woman walks past a showroom of Chinese electric vehicle (EV) maker Xpeng in Beijing on February 4, 2023. Photo: Reuters

Xpeng received 35,000 orders for the G6 sport-utility vehicle since it began presales on June 9, and president Brian Gu told reporters in a media briefing last week that the carmaker expected to be delivering 10,000 G6s a month later this year.

The firm, which along with Nio and Li Auto forms a trio of home-grown EV manufacturers aiming to challenge Tesla in the world’s largest EV market, will start delivering the SUV later this month.

The basic edition of the G6 can go as far as 580km on a single charge, while Tesla’s Model Y has a driving range of 545km.

The G6 has limited autonomous driving ability and can navigate the streets of China’s top cities like Beijing and Shanghai using Xpeng’s X NGP (Navigation Guided Pilot) software, which is similar to Tesla’s Full Self-Driving (FSD) system. FSD has not been approved by Chinese authorities and is not operational on vehicles sold in the country.

The G6 is the first model developed under Xpeng’s new technology platform called SEPA 2.0 Fuyao Global Intelligent Evolution Architecture. Founder He Xiaopeng said in April the platform is expected to shorten the carmaker’s development cycle by a fifth.

Goldman’ bullish call may add further impetus to a rally in Chinese EV stocks trading in Hong Kong, one of the few sectors to hold onto gains this year amid soured sentiment on the broader market. Xpeng has risen 54 per cent in 2023, and Li Auto has surged almost 90 per cent, while even Nio, the worst performer among the trio, has eked out a gain of about 7 per cent.

In comparison, the Hang Seng Index has dropped almost 5 per cent in the span on an exodus of foreign investors fretting over the strength of China’s post-pandemic recovery and the frayed ties between Beijing and Washington.

EV sales are a bright spot amid a disappointing economic recovery in China this year, thanks in part to the government extending subsidies.

Meanwhile, China’s general car market, the world’s biggest, has been reeling from a fierce price war that started earlier in the year. Inventories have increased amid a bleak economic outlook, while stagnant income growth sidelines potential buyers. Makers of conventional cars are feeling more of the pain, as price cuts and government subsidies make EVs more competitive.

Goldman expects Chinese carmakers to sell 8.5 million units in overseas markets by 2030, nearly triple the 3.11 million in 2022.

In the report, Hou placed sell recommendations on Guanghzhou Automobile Group and SAIC Motor, because their high exposure to fossil-fuel-powered vehicles will squeeze margins and returns on assets.

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