Another XPeng Car Catches Fire, Company Responds

Chinese electric vehicle (EV) manufacturer XPeng (XPEV) has been hit by another car fire incident. On the night of March 28, an XPeng G3 burst into flames in a residential area in the Chinese city of Shenzhen, according to local media outlets. The car burned to scrap.

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XPeng confirmed the fire incident and said no one was injured. The company said it will cooperate with authorities to investigate the incident. The G3 is XPeng’s first model. The SUV first went on sale in 2018. In 2021, XPeng launched an improved version of the car, the G3i. It was the older G3 model that caught fire.

In addition to the G3 series, the company has a total of three models on the market currently. The other models are P7 and P5 sedans. XPeng plans to launch its fourth model, the G9, in Q3 2022.

XPeng’s G3 Fire Problems

The G3 has been a problematic model for XPeng and has been involved in a number of fire incidents. In August 2020, a G3 car caught fire in an area of the Guangzhou region. In April 2021, the car went up in flames in the same region while charging.

In 2021, XPeng recalled more than 13,000 G3 cars produced between March 2019 and September 2020. It made the recall voluntarily after identifying a problem with the car’s power system.

What Does the G3 Fire Incident Mean for XPeng Stock?

The G3 fires may raise safety concerns about XPeng’s cars, which could weigh on demand for its products. But the fire incidents have been limited to the first model, which XPeng seems to be phasing out with the improved G3i variant.

So far, considering that XPeng’s stock continued to rise even after the previous fire incidents, investors have downplayed the G3 risk. As long as XPeng’s newer models are safe and car deliveries continue to rise, investors seem fine with XPeng.

In Q4 2022, XPeng’s deliveries rose to 41,751 cars, from 12,964 in the same quarter the previous year. According to S&P Global Platts Analytics, demand for electric cars continues to grow, with global unit sales forecast to hit 26.8 million by 2030 from 6.3 million in 2021.

Wall Street’s Take

On March 29, J.P. Morgan analyst Nick Lai reiterated a Buy rating on XPeng with a price target of $42, which indicates 48.9% upside potential. Lai noted that XPeng recently implemented price hikes to mitigate component cost increases, and that a new model launch is coming this year. The analyst believes that XPeng’s stock will perform well in 2H 2022, supported by margin improvement, and that volume sales will benefit from a new model and easing supply constraints.

Consensus among analysts is a Strong Buy based on eight Buys. The average XPeng price target stands at $42.7, implying upside potential of 51.5% to current levels. Shares have declined 44% year-to-date.

News Sentiment

TipRanks data shows that the News Score for XPeng is currently Positive based on 42 articles published over the past seven days. Notably, 100% of the articles have a Bullish Sentiment compared to a sector average of 62%, while 0% of the articles have a Bearish Sentiment compared to a sector average of 38%.

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