XPeng and Xiaomi are two well-known Chinese tech names making headlines in the electric vehicle (EV) space. XPeng is an established EV manufacturer gaining momentum with strong quarterly results, while Xiaomi is a consumer electronics leader expanding into EVs as part of a broader smart ecosystem strategy.
Both companies are showing innovation and ambition, but recent market valuations and broader economic risks raise important questions about whether their stocks are good buys right now.
Xiaomi: From Smartphones to Smart Cars
On May 22, Xiaomi unveiled its YU7 SUV model. Alongside the car, the company also introduced its self-developed smartphone chip, the “Surging O1,” and the new Xiaomi 15S Pro flagship phone.
This signals Xiaomi’s intent to become a vertically integrated smart hardware company—designing everything from phones to chips to EVs. Its entry into the EV sector aligns with its vision of an interconnected ecosystem, where users might seamlessly move between Xiaomi-powered devices, homes, and now, vehicles.
However, success in EVs requires more than ambition. The EV industry is capital-intensive, with complex supply chains, and fierce competition. Xiaomi may have strong brand equity in consumer tech, but the car business is fundamentally different. Established players like BYD, Tesla, Li Auto, and Nio already dominate China's EV space with strong delivery volumes and proven production capacity.
The true challenge for Xiaomi will not be unveiling products, but demonstrating consistent demand, efficient manufacturing, and profitable scaling in an ultra-competitive market.
XPeng: Strong Quarter, But Still Work to Do
XPeng recently reported a standout Q1, posting ¥15.81 billion in revenue, a 141.5% increase year-over-year. Deliveries hit a record 94,000 units, marking 330.8% annual growth. The company also achieved a record high gross margin. CEO reaffirmed the company’s Q4 profitability target.
These are impressive headline figures. XPeng appears to be regaining momentum after several uneven quarters and is benefiting from the broader recovery in EV demand in China. Its strategic partnerships—such as with Volkswagen—could help improve scale and reach.
However, XPeng has a history of inconsistent financial performance. One strong quarter, while encouraging, does not fully resolve concerns around long-term profitability, especially given competition in China’s auto market.
Valuation and Market Positioning
From a valuation perspective, both companies appear relatively expensive when compared to their historical performance and current profitability.
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Xiaomi-W (1810.HK) closed at HK$51.30 last week, close to its 52-week high of HK$59.45, and far above its low of HK$15.36. The stock pays no dividend and trades with high expectations baked in—not ideal for value-conscious investors.
XIAOMI-W (01810)
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XPeng-W (9868.HK) finished last week at HK$75.35, also closer to its 52-week high of HK$106 than its low of HK$25.50. Like Xiaomi, XPeng does not offer a dividend.
XPENG-W (09868)
Given their price levels and the fact that neither company distributes earnings to shareholders, investors buying now are betting on future growth—and accepting considerable risk in doing so.
Macroeconomic and Sector Headwinds
The broader environment also complicates the investment case. Global interest rates remain elevated, which increases financing costs for capital-intensive industries like EV manufacturing. China's economy is showing mixed signals, and consumer demand is not as strong or predictable as in past years. At the same time, the smartphone and EV markets are becoming increasingly saturated, pressuring margins and raising the bar for success.
For EVs, price cuts and a potential supply glut in China could lead to shrinking margins, even as production scales. For smartphones, rapid model updates mean companies must continuously invest in R&D just to maintain market share.
Personal View: Why I’m Staying on the Sidelines?
While both companies have shown innovation and growth potential, I personally wouldn’t invest in either right now. Their valuations are high relative to their earnings outlook, neither offers a dividend, and both operate in industries that are highly competitive.
XPeng's latest quarter was strong, but its long-term track record remains mixed. Xiaomi’s entry into EVs is interesting, but unproven. In both cases, expectations may be running ahead of fundamentals.
Add to that a cautious macro environment—with recession risk still present and global rates staying high—and it makes sense to wait for better entry points or clearer signs of sustained performance before committing capital.
Final Thought
XPeng and Xiaomi represent different approaches to the EV space—one with experience but volatility, the other with brand strength but limited automotive track record. Both could succeed, but both face meaningful challenges ahead. In times like these, patience is key. For me, these are stocks to watch closely—but not chase.
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