Source: XPeng/Agencies

Weighing a little under 600 kilograms with a flight time of 35 minutes and a maximum flight speed of 130 kilometers per hour, the «flying car» (or Electric Vertical Take-Off and Landing Vehicle, «eVTOL») can be user-driven or operated autonomously. The company started accepting pre-orders earlier this month and announced that the orders will be accepted later on in the year for delivery in 2025.

While strategy consulting firm Roland Berger expects that up to 160,000 flying vehicles will be operating around the world as air taxis by 2050, there are numerous challenges that prevent widespread adoption in the present. First, most cities around the world aren’t replete with infrastructure to make eVTOLs widely accessible. Second, the prospect of large numbers of half-ton flying machines which may or may not be robotic zipping around the skies will likely be regarded with extreme caution by administrators around the world.

For the company, there is a third factor: it isn’t alone in this space. Giants such as General Motors and Hyundai, startups such as Aeromobil as well as numerous other players in stealth mode are working on developing viable eVTOLs for a wide variety of purposes around the world. Giants such as General Motors and Hyundai, startups such as Aeromobil as well as numerous other players in stealth mode are working on developing viable eVTOLs for a wide variety of purposes around the world. As such, the announcement of pre-orders and orders generated only marginally increased attention for the company’s stock and didn’t serve to reverse bearish trends in stock valuation. A bullish trend might be imputed if there were any indications of significant cost savings becoming a sustainable trend.

In this regard, XPeng is in a significantly weaker position than current China auto champion BYD. Among the most expensive parts of an EV are its batteries. BYD started out in 1995 as a manufacturer of rechargeable batteries which it consistently built on after purchasing ailing state-owned car manufacturer Qinchuan Automobile Company to become the Berkshire Hathaway-backed monster it is today. Its in-house battery business enables it to be nimble with cutting prices and saving costs. Meanwhile, XPeng (like many others) continue to be dependent on numerous suppliers such as Contemporary Amperex Technology Co. Limited (CATL).

An argument could be made that this is a long-term growth stock due to the relative rapidity in which the company has committed to producing eVTOLs. However, the turnaround horizon for the AeroHT division becoming the company’s mainstay would likely be measurable in decades.

Exploring the unknown is a bold and visionary decision for which the company’s leadership must be commended. However, at this moment, it’s a buyer’s market both in equities as well as EVs. Expect rough weather and turbulence.

Footnotes:

1. “BYD Concludes 2023 with Record 3 Million Annual Sales, Leading Global NEV Market», 2 January 2024, BYD Press Team
2. “China’s Economy: In Recession?», 22 December 2023, Leverage Shares
3. “XPENG Announces Vehicle Delivery Results for December and Fourth Quarter 2023″, 1 January 2024, XPeng Investor Relations
4. “XPeng Inc. American depositary shares, each representing two Class A ordinary shares (XPEV) Earnings», 23 January 2024, Nasdaq Market Activity
5. “U.S. Equities vs Indian Market: Hype vs Rationale», 18 January 2024, Leverage Shares
6. «China’s $6.3 Trillion Stock Selloff Is Getting Uglier by the Day», 19 January 2024, Bloomberg News
7. «Check out video footage of XPeng AeroHT’s flying car completing its maiden flight», 26 October 2022, Electrek