Citi Research reiterated a Sell rating on XPeng Inc. (NYSE:XPEV) and cut their 12-month price target on the auto company’s shares to US$7.30/HK$28.30 (From US$10.10/HK$39.60) due to “volume likely undershooting in Mar-24E, potential lukewarm X9 orders, and an unsustainable volume-pushing strategy from 2Q24.”
Due to sluggish sales and seasonal impact, Citi anticipates Xpeng's March 2024 sales to fall below January 2024 levels, posing risks to 1Q volumes and margins. A notable 20.6% drop in EV retail prices throughout 2023, compared to 7.6% for German luxury vehicles, raises concerns. January 2024's EV performance also lags behind internal combustion engine vehicles.
Citi suggests that a significant part of 2024's expected EV demand has already been absorbed in 2023 due to substantial price cuts. To boost volume, Citi is looking for XPeng to further reduce prices starting March 2024.
Should the increase in car sales lead to higher losses and cash flow issues for Xpeng, the company may need to cut production to save cash and stay afloat. This could result in a gradual loss of market share to rival automakers.
Highlighting concerns, Citi also emphasizes that the Rmb200-300k BEV segment faces the toughest demand/supply relationship in 2024.
Shares of XPEV ended trading on Wednesday down 3.7%.