Morgan Stanley Keeps XPeng’s Overweight Rating

Morgan Stanley analyst Tim Hsiao reiterated on December 29, 2025, a $34 price target on XPeng, while maintaining a ‘Overweight’ rating on the stock.

“XPeng Among Morgan Stanley Preferred Calls for China Auto/Mobility in 2026.

We forecast that 2026 PV wholesale volume will fall 3% YoY (or -7% YoY for domestic sales), while we estimate NEV sales will decelerate to 11% growth in 2026, implying 59% sales penetration, with PHEVs (+14%) again outgrowing BEVs (+9%) in 2026e.

Exports should remain a bright spot in 2026 with 16% YoY growth, with sales to Europe, ASEAN and LatAm each growing 20-25% YoY.

From cars to “bots”

A re-rating of multiples will likely need progressive development of non-auto initiatives (e.g., physical, embodied AI, humanoids), where the capital market proves willing to finance such development.

Stock calls

For OEMs, XPeng (XPEV.N/9868.HK), Geely (175.HK) and SAIC (600104.SS) are our preferred stocks in 1H26 for their resilient domestic and growing overseas sales as well as re-rating opportunities from a non-auto “second act”.

We would recommend investors to keep a close watch on Li Auto (LI.O/2015.HK), NIO (NIO.N/9866.HK) and BYD’s (1211.HK/002594.SZ) new launches in 2Q for potential alpha generation against meaningfully reduced expectations.

For auto parts, Hesai (HSAI.O), Minth (425.HK) and Xingyu (601799.SS) are our preferred stocks.

We prefer Zhongsheng (881.HK) among dealers in view of its profit resurgence thanks to China’s stricter scrutiny on unfair auto price competition.”

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