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Up around 80% for the year, XPeng Motors (XPEV) stock is outperforming not only most other Chinese electric vehicle (EV) companies but also U.S.-based rivals. However, XPEV stock has lost over 25% from its recent highs and is in bear-market territory. In this article, we’ll examine whether the stock is a buy as the company targets a breakeven in the fourth quarter and pivots to physical artificial intelligence (AI).
XPeng Motors Targets Q4 Breakeven
To begin with, achieving a breakeven on the bottom line would be a major milestone for XPeng Motors, given the state of the Chinese EV industry that’s witnessing intense competition and the resultant price war.
Moreover, companies in the startup EV space have been saddled with perennial losses and cash burn, which necessitates frequent capital raises, leading to dilution for existing shareholders. However, XPeng Motors has been somewhat of an island in the ocean of red that the startup EV space has been. It reported record gross margins of 20.1% in the September quarter, with the quarterly net loss falling to the lowest level in five years.
The company has a strong balance sheet and ended the quarter with cash and cash equivalents of $6.8 billion. While I have often rued that startup EV companies seem to be in the business of selling their own shares rather than the vehicles they are supposed to make—with the now defunct Nikola being a prime example—XPeng has been somewhat of an outlier.
The last time XPeng issued shares to raise capital was in 2023, when Volkswagen (VWAGY) invested in the company through private placement. In fact, revenue from that collaboration has helped propel XPeng’s cash flows over the last few quarters.
Is XPEV Stock a Buy for 2026?
I believe that XPeng’s rally is far from over, and the recent dip is a good buying opportunity. Here’s why XPEV’s 2026 outlook looks positive to me.
- New Models Would Help Propel Deliveries: XPeng Motors launched its first extended-range electric vehicle (EREV), the X9, in November and plans to launch three more EREV models in the first quarter of 2026. These hybrid cars are quite popular among Chinese customers, as they come with an internal combustion engine, which helps increase the vehicle’s range. New models, including EREVs, should help propel XPeng’s deliveries next year.
- Robotaxi: On a similar note, XPeng intends to launch three robotaxi models next year. The company has among the best, if not the best, autonomous driving capabilities in China, and the launch of the VLA 2.0 model next year would only enhance the prowess, paving the way for robotaxi rollout. Volkswagen would expectedly be the first external customer for VLA 2.0, and XPeng would subsequently open-source it to other commercial buyers. Such licensing deals would help bolster XPeng’s cash flows and enable it to invest further in R&D.
- Global Expansion: Despite the tariffs they face in several regions, Chinese EV companies have been successfully expanding in global markets. XPeng Motors’ global deliveries surpassed 5,000 units for the first time in September, and it plans to introduce 3 new models in global markets next year. The company is also looking at localizing production and has initiated local production in Austria in collaboration with Magna. International expansion would be a key driver for XPeng’s deliveries in the coming years.
- Physical AI: XPeng Motors has positioned itself as a key physical AI player in China. The company unveiled its “most human-like” IRON humanoid at the AI Day last month, whose mass production is expected to commence by the end of 2026. The management projects that the humanoid’s annual global sales could hit a million units by 2030.
- Turing AI Chips: XPeng has also developed Turing AI chips and signed up Volkswagen as an external customer. Going forward, external sales of these chips might become a new business line for XPEV.
Finally, with a forward enterprise value-to-sales multiple of 1.34x, XPeng Motors looks quite attractive to me, and I used the recent dip to add to my existing positions. The company has established itself as the “Tesla of China,” and I believe markets haven’t yet done justice to its AI capabilities, even as AI plays in both the U.S. and China have seen an expansion in their valuation multiples.
XPEV Stock Forecast
The sell-side analyst community has also been warming up to XPEV, and it is now rated as a “Strong Buy” or “Moderate Buy” by 14 analysts, while the corresponding number three months back was 11. The stock’s mean target price is $27.18, which is 24.5% higher than last week’s closing prices, while the Street-high target price of $50 via J.P. Morgan implies the stock more than doubling over the next year.
I expect XPeng Motors to deliver strong returns next year as it transitions towards physical AI while continuing to grow its EV business—unlike Tesla (TSLA), whose automotive business is going through a severe slowdown even as AI ambitions have helped support the stock price. XPeng's shares are trading lower today, Dec. 1, after a somewhat soft November delivery report, which I believe is more of a blip, and the fall only makes XPEV shares even more attractive.
