XPeng Inc. has been downgraded by UBS from a "neutral" rating to a "sell" rating. UBS believes that the recent rally in XPeng's stock is overextended and does not fully consider potential downside risks.

Despite XPeng's positive momentum with new models and cost optimizations, UBS believes that these factors are already priced into the stock, while risks related to valuation and subsidy dependence are not. UBS has raised its price target for XPeng to $8.80 from $8.20, which is still more than 30% below the current trading level.

XPeng's shares have increased by over 50% since September, driven by strong order intakes and delivery figures for its MONA M03 and P7+ models. UBS attributes this demand to competitive pricing, improved features, and generous scrappage subsidies in China. UBS also notes that XPeng is trading at a significantly higher estimated 2025 price-to-sales ratio compared to its competitors Nio and Li Auto.