The Biden administration is raising the U.S. tariff on imported China-made electric vehicles to 100%. If this isn’t a trade war, then it’s at least a serious trade conflict. Does this mean XPeng (NYSE:XPEV) is in major trouble? Not at all, and it’s still a good idea to buy XPeng stock.
An upshot of the China-U.S. trade conflict is that XPeng won’t easily be able to penetrate America’s EV market. However, even without success in the U.S., XPeng is still able to sell plenty of vehicles and generate robust revenue. But don’t just take my word for it — let’s dive into the data and you can form your own conclusion.
XPeng Partners With a ‘Sugar Daddy’
How did XPeng manage to nearly double its “revenues from services and others” year over year 2024’s first quarter? The answer is that XPeng had a partnership with a famous Germany-based automaker.
More specifically, XPeng’s quarterly “revenues from services and others” increased 93.1% YOY to 1 billion RMB, or $140 million. This increase, XPeng admitted, was “related to the platform and software strategic technical collaboration with” Volkswagen (OTCMKTS:VWAGY).
XPeng CEO Xiaopeng He explained, “Through our strategic partnership with the Volkswagen Group, XPENG is at the forefront of monetizing in-house developed smart technologies as a technology enabler.” Or, as The Wall Street Journal bluntly put it, Volkswagen is XPeng’s “sugar daddy.”
That pinch of sugar evidently sweetened XPeng’s overall quarterly results. The company’s sales of $907 million beat Wall Street’s consensus estimate of $859 million. Furthermore, XPeng’s net earnings loss of 10 cents per share was much better than the loss of 33 cents per share that analysts had expected.
XPeng’s Impressive May Delivery Growth
By now, you should already be convinced that XPeng is capable of ramping up its sales despite trade-war headwinds. In case you’re craving more data, though, here’s how XPeng fared in the month of May.
As it turns out, XPeng delivered 10,146 “smart EVS” in May, up 8% month over month and a very impressive 35% YOY. This wasn’t just a fluke month, as XPeng delivered 41,360 “smart EVS” year-to-date at the end of May, up 26% YOY for that period.
The point here is that XPeng doesn’t need to achieve market penetration in the U.S. to succeed as a business enterprise. Clearly, the company is selling plenty of EVs in China and XPeng’s EV delivery growth is undeniable.
XPeng Stock: Don’t Lose Sleep Over Trade Tensions
XPeng’s shareholders should certainly keep tabs on the U.S.-China trade war/conflict. It’s a relevant topic, and staying informed should be an essential part of anyone’s investing strategy.
At the same time, there’s no need to lose sleep over trade tensions. XPeng has a powerful partner/”sugar daddy” in Volkswagen. Moreover, XPeng’s ability to deliver EVs is evident in the data. Consequently, XPeng stock is a confident clean-energy-vehicle sector pick for the remainder of 2024.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.