Barclays has trimmed its valuation for XPeng Inc., reducing its price target to $17 from $20 and keeping an Underweight rating on the company, signaling downside risk for the stock. The note follows a weak start to the year for deliveries and points to mounting cost pressures that could constrain both growth and margins in 2026.
XPeng recorded 20,011 vehicle deliveries in January. The broker highlighted that while the company previously indicated it was on track to reach break-even in the fourth quarter, government subsidies likely played a material role in achieving that milestone. Barclays flagged that sales momentum remained soft through January and into the first half of February.
Looking ahead, the analysts said a recovery in 2026 appears to hinge on the planned third-quarter introduction of the Mona SUV. Even with that launch scheduled, Barclays cautioned there is no assurance the model will secure strong consumer uptake.
Broader market conditions in China are also viewed as less supportive. The note observes that government VAT rebates have been halved in 2026 versus 2025 and that electric vehicle penetration has already moved above 50%, a dynamic the analysts say limits scope for rapid market expansion.
From a margin perspective, Barclays expects upward pressure from component cost inflation, naming chips and batteries in particular. The firm projects only a modest improvement in vehicle gross margins in 2026 compared with 2025. At the same time, the company is likely to increase research and development expenditure as it invests in initiatives such as robotaxi and humanoid robot technologies.
Taking these factors together - slower near-term sales, reduced government support, elevated input costs and higher R&D outlays - Barclays adjusted its estimates and applied a lower valuation multiple to reflect the heightened headwinds. The analysts concluded that 2026 could be a bumpy year for the company.
What this means
- XPeng faces a combination of demand and cost-side challenges that could constrain profitability and growth next year.
- Recovery expectations rest on product execution for the Mona SUV and the ability to cope with higher component costs.
- Industry-level changes in government incentives and EV penetration in China reduce the potential for rapid market-level expansion.