Xpeng Motors: A Turnaround in Motion - Why EV Investors Should Take Note

Xpeng Motors (NYSE: XPEV) has emerged as a compelling play in the EV sector, with its Q1 2025 results signaling a potential inflection point. After years of narrowing losses and aggressive cost-cutting, the company now boasts a 330.8% year-over-year surge in vehicle deliveries, robust cash reserves, and the launch of its flagship X9 model. But does its recent 66% stock rally reflect sustainable growth or fleeting optimism? This analysis explores Xpeng’s fundamentals, competitive positioning, and catalysts for further gains.

The Numbers Tell a Story of Turnaround

Xpeng’s Q1 2025 results underscore a strategic pivot:
- Revenue hit RMB15.81 billion (US$2.18 billion), a 141.5% YoY jump, driven by record deliveries of 94,008 vehicles.
- Net loss narrowed to RMB0.66 billion (US$0.09 billion), a 51.5% improvement over Q1 2024, as gross margin rose to 15.6%—up 2.7 percentage points year-on-year.
- Vehicle margin hit 10.5%, a 5-point leap from 2024, thanks to economies of scale and cost efficiency initiatives like optimized supply chains.

Crucially, Xpeng’s cash reserves remain strong at RMB45.28 billion, insulating it from liquidity risks as it scales production.

Valuation: Undervalued Relative to Peers?

While Xpeng’s stock has surged 66% since early 2025, its valuation multiples remain muted compared to peers:
- EV/EBITDA: -28.6 (based on trailing data), vs. NIO’s -3.51 and Tesla’s 8.9 (as of late ytd 2025).
- P/E (TTM): “At Loss” due to negative EPS, but this understates its improving margins.

Xpeng trades at a discount to NIO and Tesla, despite its 3.5% China NEV market share (Q1 2025) and aggressive growth targets. For context, Tesla’s China share fell to 3.2% in the same period, while NIO’s combined share (including Onvo and Firefly) is ~3.8%.

Drivers of Growth: Cost Efficiency and Model Lineup Expansion

1. Cost Control: Xpeng’s gross margin expansion reflects operational discipline—from reduced battery costs to optimized production. Its 1,089 S4/S5 ultra-fast charging stations reduce customer friction and boost brand loyalty.
2. Product Momentum: The X9 flagship, featuring Turing AI Smart Driving, targets premium buyers. Its Q2 delivery forecast of 102,000–108,000 units (up 237.7% YoY) suggests strong demand.
3. Market Share Gains: While BYD dominates with 29.7% share, Xpeng’s 63.8% QoQ delivery growth in April 2025 outpaces Tesla’s -57.9% weekly registrations drop, signaling shifting consumer preferences.

The 66% Rally: Sustainable or a Bubble?

The stock’s surge reflects optimism around Xpeng’s transition from loss-making to profitability, but risks remain:
- Competitive Threats: NIO’s Firefly and Xiaomi’s YU7 aim to capture the mid-range EV market, where Xpeng’s G6 and P7 currently lead.
- Supply Chain Risks: Global chip shortages or battery cost spikes could disrupt margins.
- Valuation Constraints: Negative EBITDA multiples limit upside until profits materialize.

However, Xpeng’s fundamentals argue for a sustainable rally:
- Margin Trajectory: Non-GAAP net loss dropped 69.8% YoY, suggesting a path to breakeven.
- Balance Sheet: RMB45 billion in cash provides a cushion for R&D and infrastructure expansion.
- Catalysts: The X9’s launch and Q2 delivery targets could drive further upside, especially if margins improve beyond 15.6%.

Investment Recommendation

• Contrarian Investors: Buy now. Xpeng trades at a valuation discount to peers despite superior execution in China’s EV market. Its cash reserves and margin improvements position it to capitalize on BYD’s slowing growth and Tesla’s declining share.
• Momentum Investors: Hold for Q2 results. If Xpeng meets its 108,000-unit Q2 target, it could trigger a re-rating as investors price in profitability by 2026.

Final Take

Xpeng’s Q1 turnaround and stock surge are not mere optimism—they’re grounded in operational discipline, market share gains, and a product roadmap that rivals NIO and Tesla. With a 3.5% China NEV share and a 690-store network, Xpeng is well-positioned to dominate the mid-range EV segment. For investors seeking exposure to China’s EV boom, Xpeng offers a compelling mix of growth and value.

Action: Consider accumulating XPEV now, with a target of US$35 by end-2025 if delivery targets are met.