Macquarie Trims XPeng Target, Citing Subsidy Cuts and 'Transition Year' Challenges

Investment firm Macquarie has taken a more cautious stance on XPeng Inc. (NYSE: XPEV), lowering its price target for the Chinese electric vehicle (EV) maker amid concerns over fading government support and a shifting market landscape.

In a note to clients on January 16, Macquarie reduced its target from $32 to $26, though it maintained an 'Outperform' rating. Analysts framed 2026 as a pivotal "transition year" for XPeng, as it plans to launch four new models even while broader consumer interest in EVs within China shows signs of plateauing.

"The reduction in federal subsidies for XPeng's MONA M03 model is a tangible headwind," said Macquarie analyst Eugene Hsiao. The firm consequently cut its 2026 delivery forecast by 8% to 545,000 vehicles. Hsiao further noted that XPeng's path to net income profitability remains highly sensitive to the revenue mix and cost structures related to its partnership with Volkswagen, with 'Other' gross profit projected to fall 27% year-over-year in 2026.

The move highlights the tightening environment for EV manufacturers in China, as state incentives that fueled initial growth begin to taper off. Companies like XPeng are now pressured to prove sustainable profitability through operational efficiency and technological edge, rather than subsidy reliance.

Market Voices:

"This target cut is a reality check," says Michael Tan, a portfolio manager at Horizon Capital in Singapore. "The subsidy phase-out separates the truly resilient players from the rest. XPeng's tech in smart driving is a real differentiator, but 2026 will test its execution during a market cooldown."

"It's frustrating to see solid companies get penalized for policy shifts," argues Sarah Chen, an independent retail investor based in Hong Kong. "XPeng is innovating faster than most. This feels like short-term noise punishing long-term vision. The market is being myopic."

"The VW partnership is a double-edged sword," notes David Fischer, an auto industry analyst at Bergstrom Research. "It provides scale and validation but also introduces complex profit-sharing dynamics. Macquarie's analysis rightly flags this as a key variable for their bottom line."

XPeng, known for its intelligent EVs, proprietary autonomous driving software, and AI-powered cockpits, continues to be a closely watched name in the high-growth segment of the Chinese auto market.