Xpeng (HKG: 9868) (NYSE: XPEV) is up 5.5% in Hong Kong today. XPEV stock is rather bouncing around on uncertainty both about the company’s own performance and also what’s happening within the Chinese EV market as a whole. Double uncertainty really does contribute to volatility. For Xpeng itself is unprofitable, trying to grow sales - with new models and so on - into its cost base. There’s also that VW investment which bolsters that position. So far so good - but then there are those varied reports about how the EV market is doing within China. Even that overall view of the Chinese economy, are those woes in the property market going to drag everything else down as well?
As we’ve said recently about Xpeng: “X-Peng (HKG: 9868) (NYSE: XPEV) shares are down 7% in Hong Kong today. The XPEV fall was 4% in New York yesterday. The concern seems to be over rising competition in the Chinese EV market. There's a slowdown in sales even as everyone's ramping up their production. Given the fixed costs in car manufacturing this will mean price reductions to get the marginal production off the lot and into consumer hands. That's just the way the industry economics works. But isn't there supposed to be some cartel, some agreement, in China between the car manufacturers?”
And, well, yes and no. The centre made its desires well known, that it should be socialist competition, not simply market price based. Then it was pointed out that this would mean a cartel, something illegal under Chinese law. So, everyone’s aware of how politics wants them to behave and yet somewhat constrained in actually doing so. A source of further uncertainty that is.
Xpeng share price from Google Finance
As we also noted a little earlier about XPEV: “Xpeng (HK: 9868) (NYSE: XPEV) stock is up 11% today in Hong Kong. This gives us a great opportunity to test one of the stock market's - in fact any financial markets' - grand memes. That we should buy the rumour and sell the fact. For what we've got here is an announcement that tomorrow, the 29th, Xpeng will make an announcement. At which point the share price rises 11%. It is possible to think of things that would increase the market capitalisation of a $9 billion company by ten and eleven percent. But we'd also tend to think that planned announcements by corporate aren't really one of those things. Takeovers, bankruptcies, government actions, yes, but a scheduled announcement of a new model? Difficult to see that really. So, we might expect the actual announcement to be accompanied by a certain deflation of this current anticipatory rise.”
Our view is really that there is so much uncertainty about both the company performance and also the market as a whole that the Xpeng share price is going to continue to be volatile - febrile even - as new information comes in. That’s just what happens when the market is uncertain.