By Michael Elkins
Morgan Stanley reiterated an Overweight rating and $12.00 price target on XPeng Inc (NYSE:XPEV) after the company announced Tuesday that it will cut the prices of the G3i, P7, and P5 by RMB20K-36K. This announcement follows recent price cuts by Tesla (NASDAQ:TSLA) and Huawei AITO.
Part of the XPeng cut comes from a RMB20K promotion at stores from 4Q22. Therefore, the actual transaction prices of the G3i and P5 remain intact despite the MSRP cut. The P7 gained a more aggressive price cut of up to RMB36K, implying an additional RMB10K-16K price cut to the incumbent P7 on top of the RMB20K discount at store level since last quarter.
With the price cuts, there is a potential for downside to the electric vehicle maker's 1Q margin.
Morgan Stanley analysts wrote in a note, "As the new procurement price of battery has yet to kick in, XPeng's 1Q23 GM would likely hit a trough with such MSRP adjustments. Order resurgence may take time, with car transactions set to slow this week as Lunar New Year draws near. Further volume upside will hinge on XPeng's new models – revamped P7 and B-Class SUV – launched in March and 2Q respectively."
Shares of XPEV are down 2.9% in pre-market trading on Tuesday.