Should Investors Buy XPeng's Dip Amid H2 2025 Volatility?

Amid heightened volatility in the second half of 2025, XPeng (XPEV) has faced periodic dips in its stock price, driven by macroeconomic concerns and sector-wide price wars in China's EV market. However, a closer look at the company's execution metrics, technological advancements, and strategic positioning reveals that these dips may present a compelling entry point for long-term investors. This analysis weighs near-term risks against XPeng's long-term growth catalysts, arguing that its fundamentals and underappreciated competitive advantages justify buying the dip.

Strong Execution: Deliveries, Margins, and Product Momentum

XPeng's Q2 2025 results underscore its operational resilience. Deliveries hit 34,611 units in June alone, marking the eighth consecutive month of over 30,000 deliveries and an 85% year-over-year surge in the first half of 2025. The company's Q2 total of 103,181 vehicles shattered its own records, outpacing 2024's full-year deliveries by 8.7%. This growth is not merely volume-driven:
- Gross margin improved to 15.6% in Q1 2025, up from 12.9% in Q1 2024, reflecting cost discipline and economies of scale.
- Vehicle margin rose to 10.5%, up 500 basis points year-on-year, as higher-margin models like the MONA M03 sedan and X9 minivan gained traction.
- XNGP autonomous driving system achieved an 85% monthly active penetration rate in urban environments, signaling strong adoption of its software-driven value proposition.

These metrics highlight XPeng's ability to balance aggressive growth with margin management—a critical differentiator in a sector plagued by pricing pressures.

Technological Leadership: The XPENG Turing Chip and AI Edge

XPeng's most underappreciated asset is its Turing AI Smart Driving platform, which integrates its in-house-developed XPENG Turing chips. These chips deliver 3x the processing power of NVIDIA's Orin-X and 2x that of Tesla's FSD chip, enabling XPeng to offer Level 3 autonomous capabilities at competitive prices. By Q2 2025, XPeng had already begun mass-producing the Turing chip, positioning it to dominate mid-range EV markets with cost-effective, feature-rich vehicles like the X9 minivan (starting at USD $49,231).

This technological edge is further bolstered by XPeng's global R&D partnerships and its invitation to present foundational AI models at the 2025 CVPR conference—a first for a Chinese automaker. Such milestones suggest XPeng is not just a volume player but a technology innovator capable of commanding premium pricing and long-term customer loyalty.

Near-Term Risks: Navigating the EV Price War and Competition

The near-term outlook is not without challenges. China's EV sector remains fiercely competitive, with BYD and NIO aggressively cutting prices to capture market share. XPeng's Q2 net loss narrowed to RMB 660 million (USD $91.4 million)—still a red ink issue—and rising R&D costs (up 46.7% YoY) could pressure margins in the short term. Additionally, geopolitical risks, such as U.S.-China trade tensions, loom over XPeng's global expansion plans.

Yet, these risks are not unique to XPeng. The broader sector faces headwinds, and XPeng's cash reserves of RMB 45.28 billion (USD $6.24 billion) provide a robust buffer to weather volatility. More importantly, its fortress balance sheet allows it to invest in R&D without diluting shareholders, a luxury competitors like Li Auto or Rivian cannot always afford.

Valuation: Undervalued Relative to Growth Potential

XPeng's current valuation reflects skepticism around its ability to sustain profitability. Its Price-to-Sales (P/S) ratio of 2.7x lags behind Tesla's 2.1x and BYD's 3.0x, despite its technological edge in AI-driven EVs. Analysts argue this discount overlooks XPeng's strategic advantages:
- Global expansion: XPeng's Q2 launch of the right-hand-drive X9 in Indonesia marks a critical step into Southeast Asia, a market with 500 million+ potential buyers.
- Software monetization: With XNGP's high penetration rate, XPeng can upsell autonomous driving upgrades, creating recurring revenue streams.
- High-margin segments: Its focus on mid-to-high-end models like the P7+ sedan and X9 targets wealthier urban buyers, reducing reliance on low-margin mass-market vehicles.

In contrast, peers like NIO and Li Auto face valuation headwinds due to higher costs and slower margin improvements. XPeng's 26.5% upside potential (per consensus estimates) suggests the market has yet to fully price in its long-term potential.

Investment Thesis: Buy the Dip, Play the Long Game

Investors should view H2 2025 volatility as an opportunity to accumulate XPeng shares at discounted prices. Key catalysts to watch include:
- Margin expansion: XPeng aims for profitability by Q4 2025, leveraging its Q2 delivery momentum and cost controls.
- X9 and MONA M03 demand: These models could drive USD $5 billion+ in annual revenue by 2026, solidifying XPeng's position in high-growth segments.
- Global adoption of Turing technology: XPeng's AI platform could attract partnerships with international automakers, unlocking new revenue streams.

Conclusion

While near-term risks like price wars and net losses warrant caution, XPeng's execution, technological prowess, and undervalued stock make it a compelling bet for patient investors. The company's ability to blend scale with innovation positions it to thrive in China's EV market and compete globally. As CEO He Xiaopeng noted, “The EV revolution is about software and AI—areas where XPeng is already leading.” For investors willing to look beyond H2 volatility, XPeng's dip could be the entry point to a multi-year growth story.

Recommendation: Consider accumulating XPeng shares on dips below USD $18, with a long-term horizon aligned to its 2026–2027 profit targets and global expansion milestones.