Morgan Stanley: XPeng MONA L05 trades price for volume: Can the larger SUV market support margins?

What does the L05’s pricing signal?

The L05 has an official recommended price of 144.8 thousand–176.8 thousand yuan and a launch price of 139.8 thousand–171.8 thousand yuan. The official price for the same configuration is 20 thousand yuan below the presale price, while a newly added entry-level version lowers the starting price by a further 30 thousand yuan.
Morgan Stanley believes pricing substantially below the presale level reflects fierce competition in the segment and will also help convert orders. XPeng has chosen more competitive prices to gain sales, but margins per vehicle face pressure.

The L05 takes MONA into the family SUV market below 200 thousand yuan. Morgan Stanley believes this segment is larger and has a more stable demand base than the compact battery-electric sedan market occupied by the M03 and L03.
The bank expects the L05 to fill the market gap left by the G6, but the key is whether it can attract new consumer groups rather than merely shift existing demand to a cheaper model. With smooth execution, the G6’s historical peak of approximately 9000 monthly sales in 2023 can serve as a reference.

Morgan Stanley notes that versions with advanced driver-assistance systems account for 91% of MONA orders, and more than half of driver-assistance users use the feature daily, indicating that intelligent driving has become an important purchase driver.
If the share of higher-specification L05 models remains at a level similar to MONA’s, a higher average selling price and software economies of scale could partially offset the cost of additional hardware. Cash-flow pressure from intensifying competition and declining profitability remains a downside risk identified by the bank.

A total of 5000 L05 vehicles have already rolled off the production line, with deliveries planned to begin in November. Morgan Stanley believes the new model will make a further contribution to sales in the fourth quarter of 2026 and support XPeng’s goal of monthly sales of 60 thousand vehicles by year-end.
The bank expects fourth-quarter delivery guidance of 135 thousand–141 thousand vehicles, supported by a recovery in overseas sales and the ramp-up of production and sales of the L03 and L05. Morgan Stanley has an Overweight rating on XPeng’s Hong Kong-listed shares, with a price target of 70 Hong Kong dollars.