Morgan Stanley: 4Q25 NDR Takeaways - Auto
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Morgan Stanley reaffirmed its Overweight rating on XPeng, setting a target price of $34, which implies a 94% upside from the current share price of $17.55. Following a recent non-deal roadshow, management provided guidance indicating that the company plans to double its overseas sales volume to 90,000 units in 2026. This expansion would increase overseas revenue contribution to 20%, up from 15% in 2025. The company intends to grow its international store footprint from roughly 300 locations to 680 by 2026 and launch two MONA SUV models abroad.
A significant development involves XPeng's chip commercialization strategy. The company projects multi-hundred-million RMB in chip revenue from its partnership with Volkswagen in 2026, expecting chip manufacturer-level margins. XPeng targets a first-quarter 2026 group gross margin of 20%, supported by bill-of-materials savings from its in-house Turing chips, higher Ultra trim adoption rates, and greater MONA platform scale efficiencies.
The automaker achieved positive profitability in its core automotive business in 2025, excluding 5 billion RMB in physical AI research and development expenses, while generating positive free cash flow. Looking forward, the roadmap for advanced technologies remains aggressive. Level 4 robotaxis are slated to begin testing in Guangzhou shortly, targeting commercial deployment without safety drivers by 2027. Additionally, humanoid robot production capacity could exceed 10,000 units by 2027, potentially generating multi-billion RMB in sales.