The market for electric vehicles has been a dynamic landscape, especially with the emergence of new entrants like XPeng MotorsHowever, the recent plunge in its stock price has been alarming, leading many to wonder about the underlying causes and future implications for the company.

On September 22, the electric vehicle sector in Hong Kong saw a significant downturn, with XPeng, along with its peers NIO and Li Auto, experiencing notable drops in share pricesDuring trading, XPeng's stock plummeted by over 15%, eventually closing at a yearly low of 51.4 Hong Kong dollarsThis downward trend reflects broader challenges in the market, compounded by external economic factors.

As of the latest reports, XPeng's share price had dropped by 12.80%, bringing its market value down to approximately 91.3 billion HKD, which translates to about 82.4 billion RMBObserving the trend on the candlestick chart reveals a stark reality; XPeng has been in a protracted downward spiral since reaching a recent high of 142.8 Hong Kong dollars on June 27. This dramatic decline has resulted in a staggering overall loss in market capitalization, around 150 billion HKD, equivalent to about 135.5 billion RMB, in just three months.

The root of this downturn can be traced back to significant monetary policy shifts made by the Federal ReserveOn the evening of September 21, the Fed announced a hike in interest rates, raising them by 75 basis points to a target range of 3% to 3.25%. The decision marked the fifth rate increase since 2022 and represented an unprecedented tightening regime not seen since 1981.

Following this announcement, the Hong Kong Monetary Authority promptly adjusted its own rates by 75 basis points to 3.50%, effective immediatelySuch moves have sparked widespread concern, leading to a decline in overall stock performance, particularly affecting XPeng’s shares.

The news surrounding XPeng wasn’t all negative, as the same day saw the company launch its fourth production vehicle, the XPeng G9. Priced between 309,900 to 469,900 yuan, the G9 is positioned as a mid-to-large electric SUV, with mass deliveries in China scheduled to begin by the end of October

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At the launch event, XPeng’s CEO, He Xiaopeng, expressed confidence in the G9, likening its potential to displace established luxury brands like Porsche in the EV market and claimed it to be the best SUV under 500,000 yuan.

Despite the optimistic projections regarding the G9's sales, He Xiaopeng acknowledged the competitive landscape, asserting that XPeng anticipates the model to outsell the Audi Q5 in terms of volume next yearHis previous statements during the second-quarter earnings call reinforced this belief, suggesting that the G9 could be pivotal in accelerating sales growth while also improving the company’s profit margins.

Looking at the financials, the outlook for XPeng remains complexIn the first half of 2022, the company reported a total revenue of approximately 14.89 billion yuan, with vehicle sales accounting for 13.94 billion yuan — a remarkable year-on-year growth of 118%. However, the company also recorded a net loss of about 4.4 billion yuan, deepening from the previous year's losses.

XPeng’s vehicle deliveries totaled 68,983 units, marking a growth of 124% compared to the same period last yearYet, the stark reality remains that the company's sales continue to incur losses, estimated at around 64,000 yuan per vehicle soldOne of the critical factors contributing to this predicament is its gross margin of 11.6%, which is the lowest among its rivals, with NIO at 13.8% and Li Auto leading at 22.1%.

XPeng has set an ambitious sales target of ensuring 250,000 units sold annually, with aspirations to reach 300,000. The G9 is projected to account for around 14% of this figure, translating to approximately 35,000 unitsTo meet its sales targets, the G9 would need to achieve monthly sales of about 11,600 units starting from its upcoming launch in October.

The aspirations outlined by XPeng underscore the need for an intense effort, given that sales data for the first eight months of 2022 yielded only 90,085 units sold, leaving a substantial gap of 160,000 units to bridge in the remaining months

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