We attended BAUTO’s official launching of its new brand Xpeng G6 EV, which is the distributor’s first China EV model under its stable. Xpeng will take over the existing showroom in Glenmarie with expansion plans to Johor, Melaka and Negeri Sembilan by 4QCY24. G6 is competitively priced at RM165k-RM185k against its closest alternatives at that price range such as the Tesla Model Y, though the sales volumes will be insignificant during our forecast period. We maintain our forecasts, TP of RM2.45 and MARKET PERFORM call.

Xpeng G6 EV out-pricing its competitors. We attended BAUTO’s official launching of its new brand, Xpeng G6 EV yesterday. It was crowded with EV enthusiasts, journalists and corporates eager to watch the official launching of BAUTO’s first foray into the Chinese brand market. The Xpeng G6 is competitively priced at RM165k-RM185k, against its closest competitors in the compact SUV segment such as the Tesla Model Y (RM191k to RM280k).

Built on Xpeng’s modular Smart Electric Platform Architecture 2.0 (SEPA 2.0) with an 800V electrical architecture, the G6 is offered in two variants, with the starting point is the 580 Pro that retails for RM165,820 (standard range at 435km WLTP standard), which is followed by the 755 Pro at RM185,820 (long range at 570km WLTP standard).

Recall, BAUTO has been awarded the distributorship, sale of spare parts and provision of after-sales services of XPeng marque smart electric vehicles (EVs) in Malaysia by Shenzhen Xiaopeng Motors Supply Chain Management Co. Ltd China and Guangzhou Xiaopeng Motors Trading Co., Ltd., China. Xpeng Motors’ is dual-listed on the New York Stock Exchange and the Hong Kong Stock Exchange.

Xpeng marque vehicles are among the top smart EVs in China as well as globally. They are equipped with the latest state of the art features such as autonomous driving technology, digital cockpits and high- performance batteries. Xpeng marque smart EVs’ Navigation Guided Pilot software offers autonomous-driving capability and can navigate major cities in China and Malaysia.

Xpeng sold 141,601 EV vehicles (+17%) to mainland China customers in 2023. Currently, its product line-up includes the P7i (sports sedan), P5 (family sedan), G9 (flagship SUV) and P7i (sports sedan) and the newly launched X9 (flagship MPV). The Xpeng G6 was launched recently in Hong Kong which was distributed by SIME (OP;TP: RM2.90).

Impact on earnings. We estimate that the earnings impact of the latest development is negligible at <1%. The new distributorship required minimum capex (probably less than RM2m) and Xpeng will take over existing showroom in Glenmarie, Shah Alam, just beside the existing Mazda showroom. Given the crowded EV market with various new EV launches, we believe that at most it will only be able to sell a few hundred CBU units during the first year of operations.

Forecasts. Maintained.

Valuations. We also maintain our TP at RM2.45 based on unchanged 10x CY25F PER, at a 1x multiple discounts to the sector’s average forward PER of 11x to reflect higher earnings risk for mid-market auto players on subsidy rationalisation which will hurt their target customers, i.e. the middle-income group, the most. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 4).

Investment case. We continue to like BAUTO for: (i) its strong near-term earnings visibility backed by an order backlog of 2k units for Mazda, and Kia vehicles, (ii) its premium mid-market Mazda brand that offers superior margins, and (iii) its attractive dividend yield of about 8%. However, we are concerned over subsidy rationalisation hurting its target customers, i.e. the middle-income group. Maintain MARKET PERFORM.

Risks to our call include: (i) consumers cutting back on discretionary spending (particularly big-ticket items like new cars) amidst high inflation, (ii) supply chain disruptions, (iii) escalating input costs, and (iv) MYR weakens against JPY.

Source: Kenanga Research - 28 Aug 2024