Up 76% YTD, This Chinese EV Stock Has Dwarfed Tesla with YTD Returns. Is It Time to Buy?

Globe and Mail

22-05-2025

Tesla (TSLA) stock has struggled so far this year. The electric vehicle (EV) giant faces a range of short-term challenges that weigh heavily on its stock performance. Its vehicle deliveries have been underwhelming, and macroeconomic concerns have weighed on EV demand.
Further, the highly competitive Chinese EV market has put additional pressure on the company and its stock price. Additionally, CEO Elon Musk's controversial involvement in the Department of Government Efficiency (DOGE) has impacted the company's reputation.
As a result, Tesla's stock has declined roughly 17% year-to-date, significantly underperforming the broader market.
In contrast, Xpeng (XPEV), a smaller Chinese EV company, has had an exceptional run in 2025. While comparing the two companies directly may not be entirely fair given Tesla's much larger scale, Xpeng has stood out with its operational strength. The company has steadily increased its vehicle deliveries, improved profit margins, and narrowed its financial losses. Moreover, Xpeng's management remains confident, projecting continued momentum into 2025.
Xpeng's solid financials and its management's optimism are reflected in the stock's performance. Xpeng shares have soared more than 76% year-to-date and are up about 137% over the past 12 months. Despite this impressive rally, analysts believe there's still room for growth. The Street-high price target on Wall Street for Xpeng sits at $31 per share, implying more than 55% upside from current levels.
Xpeng Defying Broader Challenges in the EV Industry
While the broader EV industry is witnessing softness in demand, Xpeng posted its best-ever quarterly delivery numbers, with 94,008 vehicles delivered in Q1 2025, a remarkable 331% increase compared to last year.
Besides higher volumes, Xpeng's focus on cost management and operational efficiency is adding to its appeal. Xpeng's vehicle gross margin has now improved for seven consecutive quarters, pushing the company's overall gross margin to a record high of 15.6% in Q1. This margin improvement stems from scale-driven efficiencies and ongoing cost reduction efforts.
With rising margins, the company's bottom line is also showing notable improvement. Xpeng has significantly narrowed its net loss compared to the same period last year and reported solid free cash flow.
Strong Outlook for Q2 and Beyond
Looking ahead, Xpeng's growth engine shows no signs of slowing. Management projects deliveries between 102,000 and 108,000 vehicles in Q2, an increase of 237.7% to 257.5% year over year. Revenue is also expected to climb between 115.7% and 130.5%. The company's management is confident it will more than double its sales this year, expecting to turn profitable in the fourth quarter and generate substantial free cash flow for the full year.
The second quarter will also see Xpeng introduce five upgraded or facelifted versions of existing models. While this could create short-term market volatility, these updates are a strategic move to strengthen the company's long-term product appeal. Starting in Q3, Xpeng plans to become more aggressive with its product rollout strategy, with a lineup that will include higher-priced vehicles carrying stronger profit margins. This shift will improve the overall mix and drive even healthier returns.
International expansion will be another growth catalyst. Xpeng's overseas deliveries surged in Q1, and with more than 40 new stores launched abroad in the first quarter alone, the company is well on its way to building a significant global footprint. Management anticipates this overseas business will majorly contribute to revenue and profitability over the next three years.
Beyond the core automotive business, Xpeng is investing in artificial intelligence (AI) and robotics. Its proprietary AI capabilities are already being integrated into its vehicles and will soon extend into humanoid robotics, targeting commercial and industrial applications. The company expects to roll out its first humanoid robot in 2026, which will significantly accelerate its growth.
Conclusion: Is Xpeng Stock a Buy?
Xpeng stock has been on an impressive run lately, which is why Wall Street analysts currently maintain a 'Moderate Buy' consensus rating.
While Wall Street remains cautiously optimistic, Xpeng is delivering more vehicles than ever, with strong momentum in China and international markets. The company also has a strong pipeline of new models set to launch, keeping its product lineup fresh and competitive. Importantly, Xpeng's push toward profitability is beginning to pay off. Operational improvements are showing up in its financials, and the company is steadily reducing its losses.
With strong growth prospects, improving financial health, and innovation in AI and humanoid robotics, Xpeng stock may continue to outperform the broader market, including Tesla.