Xpeng president says threat of US delisting still 'several years away'

Brian Gu believes there is still time for the US and Chinese governments to reach a compromise.

Shares of Chinese electric vehicle companies have fallen sharply because of investor concerns about the risk of delisting the ADRs of US-listed Chinese companies. But in Xpeng Motors' view, that's not an imminent threat.

Xpeng is "following closely" the furor surrounding US-traded Chinese technology companies, although the threat of forced delisting from US exchanges is still "several years away," the company's president, Brian Gu, said in an interview with Bloomberg on Tuesday.

Xpeng already has a dual primary listing in Hong Kong, which would allow the company to be able to trade independently in the city if a delisting from US exchanges were to materialize, Gu said, adding that there is still time for the Chinese and US governments to reach a compromise.

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"We have the preparation already done to prepare for any eventualities," Gu said.

With the US Securities and Exchange Commission passing amendments to finalize rules implementing the Holding Foreign Company Accountability Act (HFCAA), stocks of Chinese electric vehicle companies listed there suffered sharp declines last week.

Nio, Xpeng and Li Auto fell 11.19 percent, 9.3 percent and 15.95 percent, respectively, in the US on Friday.

In a research note sent to investors Monday, Deutsche Bank's Edison Yu's team said the market is clearly signaling that the opportunity is much greater now than it was a week ago, but that the law is not a new development and that stocks generally shrug off the news after each "new cycle".

Yu's team believes that Xpeng and Li Auto are now in a better position to deal with the risk of delisting because they both have primary listings in Hong Kong, which essentially means their US-traded shares can be converted to Hong Kong shares on a 1:2 basis.

In addition, Xpeng is expected to be included in the Shanghai-Hong Kong Stock Connect in mid-February 2022, followed by Li Auto in March, thus allowing mainland investors to invest directly in their shares for the first time, which would be a big tailwind, the team said.

Nio is currently in a less favorable position because it doesn't have a dual primary listing in Hong Kong, which is probably why it sold the most of the three last week, the team said.

"In our view, Nio will eventually list in Hong Kong similar to XPEV/LI and this would occur much earlier than potential worse case delisting deadline," Yu's team said.

In the interview with Bloomberg, Gu also addressed the issue of access to the US market, saying that the Chinese government will be supportive of Xpeng's efforts to expand globally, however, the US market may be "difficult to tackle" in the short term.

"We need to be fully prepared before we make that decision. If you look at the auto companies that have made an effort to go in to the US, it took decades to make it happen," Gu said.

Xpeng is now entering the Norwegian market, as is Nio, and announced in late October that the Xpeng P7 Rear-Wheel Drive (RWD) Super Long Range and 4-Wheel Drive (4WD) High-Performance versions are officially available in Norway.

In Norway, Xpeng has established 17 local sales outlets and 21 service outlets with local dealer partners, Xpeng said previously.

Xpeng's US-traded shares closed up 2.42 percent to $47.40 on Tuesday. Its Hong Kong-traded stock was up 1.89 percent at press time.