In reaction to Tesla’s (NASDAQ: TSLA) pricing cutbacks in China, XPeng (NYSE: XPEV) lowered the cost of its electric vehicles last week. Early on, investors saw XPeng’s move as a show of desperation and a strategy that may be detrimental to the company’s future success. Even if that’s still the case, it seems that price reductions are really what’s causing a boom in demand among Chinese buyers, at least for Tesla.
The demand for XPeng should increase since the price decreases will have a good effect on the company’s bottom line. However, Tesla and XPeng’s financial situations couldn’t be more different. While these price reductions may reduce Tesla’s profit margins, they will not lead to a loss in the company’s bottom line since Tesla is very profitable.
In order for XPeng’s price reduction to be profitable, the company will need to witness a dramatic increase in sales. This could be aided by the two new EV models, which are set to be launched in Europe on February 3, 2023. XPeng is set to increase its bets on Europe to increase its sales, and it’s worth watching this development.
Source: https://finbold.com/xpeng-to-launch-two-new-evs-in-europe-on-february-3-xpev-rally-incoming/