Comparing XPeng and Li Auto: Which Chinese EV Stock Wins Out?

XPeng XPEV and Li Auto LI are two of the most promising names in China's booming new-energy vehicle (NEV) market. Both companies have captured investor attention by carving out unique niches—XPeng with its AI-driven EVs and Li Auto with its extended-range electric vehicles (EREVs). As China's NEV sales continue to surge, backed by consumer demand and government support, these two automakers are locked in a fierce battle for dominance. Given their rapid growth trajectories and innovations, now is the perfect time to compare XPeng and Li Auto to see which one might hold better investment prospects.

Both companies operate in an intensely competitive environment marked by price wars, technological races and global expansion ambitions. Yet, while they share many similarities, their strategies and financial profiles differ significantly. Let’s dive deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.

The Case for XPeng Stock

XPeng has been making impressive strides. In Q1 2025, the company delivered a record 94,008 vehicles, a staggering 331% year-over-year surge. Much of this momentum is tied to the success of the Mona M03, an affordable electric coupe that captured cost-conscious buyers without sacrificing tech innovation. XPeng’s revenue growth is set to impress, with estimates calling for a 92% jump in 2025, while earnings are projected to rise by 65%.

Margins have been a traditional weakness for XPeng, but that's improving fast. Its vehicle margin climbed to 10% in Q4 2024 from just 4.1% a year ago. Though still trailing Li Auto’s industry-leading 19.8%, XPeng’s steady progress shows a clear path toward breakeven, which management targets by the end of 2025. Its gross profit soared to RMB 5.8 billion in 2024, a huge leap from RMB 451 million in 2023.

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XPeng’s biggest differentiator lies in its full-stack AI and autonomous driving innovations. Features like the AI Hawkeye Visual Solution, XOS 5.4 operating system and smart driving tech in the P7+ sedan set it apart. Furthermore, XPeng’s ventures into flying cars and humanoid robots, though speculative, demonstrate bold ambition that could pay off in the longer term.

However, valuation remains a sticking point. XPeng currently trades at a forward sales multiple of 1.52—well above Li Auto’s 0.92. After a 148% stock rally over the past year, some investors may worry about overstretched valuations. Still, given XPeng’s triple-digit delivery growth, improving margins, and strong analyst support (average brokerage recommendation of 1.97), many are willing to bet on further upside.

The Case for Li Auto Stock

Li Auto has built an enviable reputation around premium EREVs and strong execution. In 2024, the company delivered over 500,000 vehicles, up 33% from the 2023 levels, and posted a net income of $1.5 billion—an impressive feat in an industry where many peers still burn cash. In the first quarter of 2025, it delivered 92,864 units, up 15.5% year over year, maintaining steady momentum.

Financially, Li Auto holds a clear edge. Total revenues for 2024 hit $19.8 billion, and operating margins remained healthy despite pricing pressures. Its vehicle margin was at 19.8%, well above XPeng’s 10%, reflecting stronger pricing power and better cost control. With $9 billion in cash and manageable debt, Li Auto has the financial muscle to fund aggressive R&D, build infrastructure, and expand internationally without stressing its balance sheet.

Li Auto’s expanding portfolio also bodes well. The company plans to roll out several BEV models in the next 12-18 months, diversifying beyond its hybrid stronghold. Its first pure battery model, the Li MEGA minivan, and upcoming SUVs like the Li i8 and i6 are aimed at boosting deliveries and broadening customer reach.

Still, Li Auto faces challenges. Growth rates are slowing compared to XPeng’s meteoric rise. Its gross margins also came under pressure due to aggressive pricing and product mix shifts, dropping from 23.5% to 20.3% year over year. Moreover, heavy dependence on the Chinese market leaves it vulnerable to domestic slowdowns, regulatory changes, and EV subsidy adjustments. Although Li Auto has started its global push with service centers in Dubai, Kazakhstan, and Germany, overseas revenues are still nascent.

While XPeng trades at a higher valuation, Li Auto’s current forward valuation is cheaper and arguably more justified by its profitability and cash flows.

Conclusion

XPeng and Li Auto both stand out in China’s fiercely competitive NEV landscape. Li Auto shines with stronger profitability, cash flow strength, and a robust product pipeline. XPeng, however, dazzles with its rapid growth, improving margins, and cutting-edge technology ambitions.

Both stocks are currently Zacks Rank #3 (Hold) names, suggesting that neither is a screaming buy right now. However, if forced to choose, XPeng has a slight edge due to its explosive growth momentum, AI-driven innovation and strong market sentiment. Investors looking for faster growth and technological leadership may focus on XPeng at this stage.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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