How to invest in Xpeng from the UK

Should I invest in Xpeng?

Xpeng is a Chinese company dedicated to the manufacture of high-end electric vehicles. It was founded in 2015 by Xia Heng and He tao, together with two important partners who believed in the project: He Xiaopeng, former executive of Alibaba and Lei Jun, founder of Xiaomi.

This company, also known as Xiaopeng Motors, decided to enter the competitive electric vehicle segment, a sector dominated by Tesla and where NIO already existed in China. However, despite also being luxury vehicles, Xpeng has differentiated itself because its main objective is to provide comfort in its vehicles, beyond speed.

The company currently offers two vehicle models, the G3 and the P7. In the case of the G3, it is an SUV that began marketing in 2018 (although its foundation was in 2015). While the P7, a very comfortable sedan, they brought it to market in 2020.

Its IPO was on August 27, 2020, so there is no historical information about its performance as can be found from other companies. But at the time of its IPO, in the company's prospectus, it notified that by July 2020 it had sold 18,741 units of the G3 and 1966 units of the P7.

These are obviously quite small numbers when compared to other companies in the same sector. In fact, although Xpeng is listed on the New York Stock Exchange, it only markets its vehicles in China because as we mentioned, it is a small company.

An important detail is that when reviewing the company's financial reports (you can find them on its official website) we find that the company since its foundation has generated losses.

The year 2020 has been the only year in which sales have exceeded the cost of sales generating 40 million dollars of profit. However, this figure is only about sales because when operating expenses (research and development, administrative and general expenses) are added in, Xpeng has a net loss of $418 million. And it was their best year ever.

Straight up we recommend you look at other established companies like Tesla if you are interested in investing in the electric vehicle sector. Because at the end of the day, if all you are offering is the potential going forward, you are not offering anything that Tesla or NIO does not.

What instruments can you trade?

About Index Funds

This is the best option for people who can invest in the long term, especially for beginners, because it is inexpensive, diversified, and safer.

Contrary to what it may seem, it is not easy to beat the market (although you have probably heard of investors who achieve huge returns).

But besides Warren Buffett and a couple more, not everything is as good as it sounds: when someone brags about having beaten the benchmark, it was probably for a short time, or their fees are really high. Also, take into account that if something happened in the past it doesn't necessarily represent a regular behavior.

The great advantage of index funds is that they solve both issues: their rates are minor and they beat active managers most of the time, although in the long term.

Currency market

Forex or currency trading allows obtaining profits by exchanging one currency for another.

If you decide to trade EUR and USD, for instance, you speculate how many dollars it will take to buy a euro, with the expectation that the euro will rise compared to the dollar. Therefore, if you purchased each euro at 1.15 USD and you sell them back when they are worth 1.20 USD, you'll be keeping that margin.

You may be thinking that operating with currencies requires high investments, and you are not wrong, because increases in prices are never that dramatic, and often you will need to use a lot of leverage (which sometimes can be too much of a risk). Our advice for those who are new in the world of trading is not to start with Forex, but with a safer and more secure market.

You can operate with almost every currency on this broker. Still, bear in mind that in this market sales are made through contract for differences, so you will not be the owner of the underlying asset.

About Contracts for Difference

You probably have seen the acronym CFD repeatedly if you already registered on this broker. Before we explain this further, we must say that cryptocurrency trading on this broker is only CFD when you are short-selling.

We will also explain terms like leverage and “going short”, in case you are interested in day trading cryptocurrency or other more advanced operations.

this broker allows you to bet both “in the black” and “in red”. Let's say that you believe that the Xpeng will fall, so perhaps you consider that it is better to wait until it does and then go in. However, if it really goes down, it is possible to make some profits out of that.

You can accomplish that by “going short”. More or less, this is how it works:

  • You ask for a loan of, let's say, 100 units of Xpeng, which total value at that moment is $ 5,000 (these numbers aren't real)
  • You make $ 5,000 by selling the 100 units
  • As you guessed, the price falls, and the unit of Xpeng goes from $ 50 to $ 30
  • You buy all 100 units again, but at the current price, $ 3,000
  • Then you return the 100 units
  • The rest is yours, so, you will have made $ 2000

It is really simple. Just take into account that by trading in Xpeng on this broker, with CFDs you can make a profit when you anticipate downs.

How does leverage work

If you still don't know what “leverage” is, we'll describe it briefly: it is the possibility to use a higher amount than you actually have. For example, you can enter with $ 100, but if you leverage x2, your initial investment will be $ 200.

About leverage, Take Profit and Stop Loss

Assuming that, for instance, you are positive that Xpeng price is going up, and that you have $ 1,000 for “going long”, you should know that you can increase your investment and make more money.

Possibly, you could ask a financial company for a credit, put an asset as collateral, wait for it to be accepted, wait for the money, send the money to the broker, confirm that it arrived, and then buy Xpeng… But by that moment it is possible that your prediction was confirmed already and Xpeng price is so high that it is not worth investing.

Thanks to leverage, you can get that amount of money with two clicks. It's exactly like borrowing money, but much better: from the broker itself. You can get financing to invest much more money than you actually have on the the broker wallet. Before trading, you will find the leverage options as in the screenshot:

apalancamiento

With other assets, you can use more leverage. Why? Because cryptocurrencies are usually medium-long term investments, and leverage is used especially for short-term operations or day trading. Let's talk a bit more about how leverage works.

If you have the $ 1,000 and use leverage x2, you will be investing $ 2,000, as we mentioned. The broker puts the remaining amount to reach that figure.

A week after that, turns out that Xpeng price goes up and now the value of your investment is 20% higher, which means, you have $ 2,400 in Xpeng shares. So, a wise decision is to sell them back now.

Obviously, the 1k $ from leverage will be deducted, and you'll have $ 1,400 left, of which $ 1000 is the money you invested yourself, so the net profit is $ 400.

In conclusion, by investing $ 1000 and obtaining $ 400, your net profit would be 40%. That is quite good.

But there's always a drawback. If all goes as you intended and the asset increases, you will make money. However, if the price falls, you will also lose more money than you invested.

Supposing that the asset didn't increase by 20%, but it decreased also by 20%, you won't lose $ 20 but double, $ 40. That is why the terms “Take Profit” and “Stop Loss” are so important when trading with leverage.

Take Profit is used as a form of reducing risks when trading. When you enter, you can set a profit limit and ask that your position is automatically closed when the asset reaches a price. 

If you bought Xpeng shares at $ 100, you request the broker to close when it reaches $ 120. That way, you make sure you won't be blinded by greed and decide to keep waiting in case it keeps rising, which could be a mistake since the price could go down again really fast.

On the other hand, when using leverage you also have to use Stop Loss, because a small fall in the price of an asset can have a big impact on your wallet. That is why it is vital to establish a Stop Loss more tight than that suggested by the platform.