What you need to know about Xpeng, Tesla’s latest rival in China

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Chinese manufacturer of electric vehicles Xpeng (NYSE: XPEV) is now public. The aspirant Tesla (NASDAQ: TSLA) Rival said it sold 100 million U.S. Depositary Shares (ADSs) for $ 15 each, raising around $ 1.5 billion in an initial public offering that began trading on August 27.

It was a better-than-expected result, suggesting auto investors are still keen to acquire shares in electric vehicle start-ups following huge gains from Tesla shareholders and NIO (NYSE: NIO), among others.

Here’s a look at Xpeng, its public offering, and its place in the white-heated electric vehicle market in China.

Who is Xpeng?

Xpeng is a new name in the United States, but it’s not entirely new to China. Founded in 2015 by the former Alibaba CEO Xiaopeng He and auto industry veteran Heng Xia, the Guangzhou-based automaker, build “smart EVs” to more or less directly compete with Tesla’s low-cost offerings, the Model 3 sedan and the SUV Model Y crossover.

Xpeng’s two models, the G3 crossover and the P7 sedan, are similar in concept to the two Teslas in that they are premium electric vehicles with good range and advanced driver assistance features. But they differ in some ways. Notably, the Xpengs are tuned to deliver comfort rather than performance, with a smoother ride and plush interiors that are (according to the company) better suited to Chinese driving conditions.

Xpeng’s P7 sedan is roughly the same size as Tesla’s Model 3, but it emphasizes comfort rather than performance. Image source: Xpeng.

Both vehicles have been in production: the G3 since November 2018 at a contract manufacturing facility owned by established automaker Haima, and the P7 at the new Xpeng factory in Zhaoqing. The Haima plant can produce up to 150,000 vehicles per year, and the Xpeng plant in Zhaoqing can build 100,000.

As of July 31, Xpeng had delivered a total of 18,741 G3 and 1,966 P7 to its customers.

The company does not intend to export its vehicles to the United States. For now, it is an exclusively Chinese piece.

Xpeng’s IPO went very well

Xpeng expected to sell 85 million ADS at around $ 12 each. In fact, it sold about $ 100 million at $ 15 each, raising about $ 1.5 billion before fees, and granted its underwriters a 30-day option to buy up to 15 million additional shares. .

If all of those extra shares are sold at $ 15, that will raise an additional $ 225 million before fees.

The company plans to use the profits to expand its sales and service networks in China, to bring its next models into production, and for general corporate purposes.

Xpeng previously raised $ 400 million in November 2019, before its Zhaoqing plant opened. He raised an additional $ 500 million in July.

Xpeng started shipping P7s from its new factory in May. Image source: Xpeng.

Is Xpeng Profitable?

Not yet. The company recorded operating losses of $ 535 million in 2019 and $ 202 million in the first half of 2020.

How much money did he have before the IPO?

As noted above, Xpeng raised $ 500 million in a private round in July. At the end of June, it had around $ 150 million in cash and cash equivalents, up from $ 276 million at the end of 2019.

The company’s operating cash flow was negative $ 172 million in the first half of 2020 and $ 504 million in 2019.

Where is it in the Chinese EV market?

Xpeng is one of several Chinese domestic electric vehicle makers aiming to take a share of the premium electric vehicle market targeted by Tesla, which opened its own factory near Shanghai late last year.

Besides Tesla, Xpeng’s competitors include NIO, Li Auto (NASDAQ: LI), WM Auto (not yet public), high-end models from WORLD (OTC: YES.Y)and electric models from established global automakers including BMW and Mercedes-Benz.

Is Xpeng share a buy?

Given the large number of new EV stocks that have hit the market in recent months (and the large number of companies in the space that are not yet open as well), I would suggest auto investors take a breath. before diving here. Personally, I think we need some better readings on Xpeng’s performance and competitiveness before we call it a buy, and it will take some time to get them.

That said, if you already own stocks in companies like NIO and Li and wanted to add a small stake in Xpeng to your EV portfolio, I wouldn’t object.



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