Chinese electric-vehicle maker Xpeng (NYSE:XPEV) is now public. The aspiring Tesla (NASDAQ:TSLA) rival announced that it sold 100 million American depositary shares (ADSs) for $15 each, raising about $1.5 billion in an initial public offering that began trading on Aug. 27.
That was a better result than expected, suggesting that auto investors are still eager to snap up shares of electric-vehicle start-ups in the wake of huge gains by shareholders of Tesla and NIO (NYSE:NIO), among others.
Here’s a look at Xpeng, its public offering, and how it fits into the white-hot electric-vehicle market in China.
Who is Xpeng?
Xpeng is a new name in the U.S., but it’s not quite new in China. Founded in 2015 by former Alibaba executive Xiaopeng He and auto-industry veteran Heng Xia, the Guangzhou-based automaker builds “smart EVs” intended to compete more or less directly with Tesla’s lower-priced offerings, the Model 3 sedan and Model Y crossover SUV.
Xpeng’s two models, the G3 crossover and the P7 sedan, are similar in concept to the two Teslas in that they’re upscale electric vehicles with good range and advanced driver-assist features. But they differ in some important ways. Notably, the Xpengs are tuned to provide comfort rather than performance, with a softer ride and plush interiors that are (the company claims) better suited to Chinese driving conditions.
Xpeng’s P7 sedan is about the same size as Tesla’s Model 3, but it emphasizes comfort over performance. Image source: Xpeng.
Both vehicles are in production: the G3 since November 2018 at a contract-manufacturing plant owned by established automaker Haima, and the P7 at Xpeng’s new factory in Zhaoqing. Haima’s plant can produce up to 150,000 vehicles per year, and Xpeng’s Zhaoqing plant can build 100,000.
As of July 31, Xpeng had delivered a total of 18,741 G3s and 1,966 P7s to customers.
The company has no plans to export its vehicles to the United States. For now, it’s a China-only play.
Xpeng’s IPO went really well
Xpeng had expected to sell 85 million ADSs at around $12 each. In fact, it sold about 100 million at $15 each, raising roughly $1.5 billion before fees, and granted its underwriters a 30-day option to purchase up to 15 million additional shares.
If all of those additional shares are sold at $15, that will raise a further $225 million before fees.
The company plans to use the proceeds to expand its sales and service networks in China, to get its upcoming models into production, and for general corporate purposes.
Xpeng had previously raised $400 million in November 2019, ahead of the opening of its Zhaoqing factory. It raised an additional $500 million in July.
Xpeng began shipping P7s from its new factory in May. Image source: Xpeng.
Is Xpeng profitable?
Not yet. The company posted operating losses of $535 million in 2019 and $202 million in the first half of 2020.
How much cash did it have before the IPO?
As noted above, Xpeng raised $500 million in a private round in July. As of the end of June, it had about $150 million in cash and equivalents, down 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 negative $504 million in 2019.
Where does it fit in China’s EV market?
Xpeng is one of several domestic Chinese electric-vehicle makers aiming to take a share of the upscale EV market targeted by Tesla, which opened its own factory near Shanghai late last year.
Aside from Tesla, Xpeng’s competitors include NIO, Li Auto (NASDAQ:LI), WM Auto (not yet public), upscale models from BYD (OTC:BYDD.Y), and electric models from established global automakers including BMW and Mercedes-Benz.
Is Xpeng stock a buy?
Given the large number of new electric-vehicle stocks that have hit the market over the last few months (and the also-large number of companies in the space that aren’t yet public), I’d suggest that auto investors take a deep breath before diving in here. Personally, I think we need better reads on Xpeng’s execution and competitiveness before calling it a buy, and it’ll take some time to get those.
That said, if you already own shares of companies like NIO and Li, and you wanted to add a small stake in Xpeng to your electric-vehicle portfolio, I wouldn’t argue against it.