The recent announcement of a partnership between Chinese electric-vehicle maker XPeng and Volkswagen has caused a stir on Wall Street. As a result, XPeng shares have seen a surge in upgrades from analysts. Earlier this week, VW announced that it is investing $700 million in XPeng and collaborating on the development of electric vehicles (EVs) in China. This promising deal propelled XPeng’s stock price up by almost 27% on Wednesday.
Following the news, analysts at Macquarie and Jefferies upgraded their ratings on XPeng. Macquarie’s Erica Chen changed her recommendation from Sell to Hold, while Johnson Wan of Jefferies upgraded it to Buy from Hold. Wan also raised his price target on XPeng’s U.S.-listed American depositary receipts (ADRs) from $7.80 to $25.30 per share.
Not only is this partnership a significant boon for XPeng, but it also brings benefits to Volkswagen. Citi analyst Jeff Chung noted that VW’s market share in China’s domestic EV sales declined from 3.5% in 2022 to 2.4% in the first half of this year. The collaboration with XPeng will allow Volkswagen to explore new strategies and prevent further decline in its market share in China.
In premarket trading on Friday, XPeng’s ADRs continued to climb, with an additional 6.8% increase. Meanwhile, S&P 500 and Nasdaq Composite futures showed gains of 0.4% and 0.8%, respectively.
Currently, approximately 60% of analysts covering XPeng rate its shares as Buy, surpassing the average Buy-rating ratio for stocks in the S&P 500, which stands at about 55%. However, despite the optimistic outlook, the average analyst price target for XPeng is just $12.45 per share, while the ADRs are trading at $21.52 in premarket trading. Over the past year, XPeng stock has experienced a 17% decline due to lower deliveries amid industry growth.
In the first half of 2023, XPeng delivered 41,000 vehicles, a decrease from the 69,000 vehicles delivered in the same period in 2022. Nevertheless, the overall battery-electric sales in China have seen a roughly 30% increase year-to-date, reaching approximately 2.5 million units.