Electric vehicles hit another milestone Wednesday. There is a sophisticated, lidar-equipped EV that can be had for less than $25,000. The vehicle isn’t from EV leader
Chinese EV maker
(ticker: XPEV) launched its third production model, the P5 sedan. A lidar-equipped EV that starts at less than 160,00 Chinese renminbi, or less than $25,000.
There are lower-priced EVs on the market, but not with lidar-enabled, advanced driver assistance systems and not with range of the P5.
Lidar is essentially laser-based radar and helps enable autonomous driving functions. XPeng is quick to point out that its driver assistance features—like all others available in passenger vehicles bought by consumers these days—still require drivers to pay attention to the road at all times. Autonomous driving systems can do a lot—even make unprotected left turns on city streets—but they aren’t truly self-driving yet.
Lidar is unusual on a car for consumers. It’s an impressive feature for a lower-price EV. In addition, the P5 sedan will go roughly 290 miles to 375 miles on a single charge, depending on the configuration purchased. That also compares favorably to more expensive EVs.
More affordable EVs open up a new segment of the market for the battery electric car industry. Only a few segments of the auto universe has competitive EVs for sale. Light-duty pickup trucks are arriving now. Rivian is expected to start deliveries of its pickup in 2021. And a Tesla Model 3 as well as a Chevy Bolt—two popular EV models—can retail for between $40,000 and $60,000. Both are more expensive than Honda Civic- or Toyota Corolla-type vehicles. Tesla is working on a lower-priced model, starting at about $25,000 as well. Investors expect that model to arrive around 2023.
Despite the P5’s low purchase price, XPeng President Brian Gu says P5 profitability should fall between its less profitable G3 SUV and the more profitable P7 sedan. XPeng’s gross profit margins from selling cars have been positive for the past four quarters, coming in at about 11% in the second quarter of 2021. Vehicle profit margins have improved as volumes have grown and after the company introduced the P7 sedan.
The stock isn’t reacting too positively to the announcement, however. Shares are down 3.7% in midday trading Wednesday. The
is up 0.5%, while the
Dow Jones Industrial Average
is up about 0.3%. Tesla (TSLA) shares are up about 0.6%
The P5 looks like a winning product, so launch disappointment likely isn’t responsible for share price weakness. Other things that came up arose on the company’s launch conference call might be concerning investors. Two areas Gu addressed—in response to questions—were the number of EV companies in China and competition from foreign competitors.
There are hundreds of EV companies in China and the government wants fewer of them. Companies such as XPeng, however, are the larger, established players. It will be up to them, and other traditional auto makers, to mop up the excess capacity. That could be an overhang on the stock, but XPeng might have a chance to pick up manufacturing capacity at a discount.
Gu also said he believes foreign auto makers could be successful selling EVs in China. That also might unnerve investors, but Gu pointed out his company has a sizable lead offering products at price points that are attractive to Chinese buyers.
China is the world’s largest market for new cars and for EVs. About 10% of all new cars sold in China this year have been all-electric or plug-in electric hybrids.
XPeng stock is down about 13% year to date, trailing behind the 19% gain of the S&P 500. Still, shares are up about 77% over the past 12 months. The S&P is up about 31% over the same span.
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