© Xpeng Inc. XPeng (NYSE:XPEV) stock is down 5% in early trading on Friday, sliding toward $18 after closing at $19.15 the day prior. The move comes on the same morning the company reported its Q4 2025 earnings, and the reaction tells a familiar story: the numbers looked great, but what comes next has investors nervous. The drop lands after a rough stretch. XPEV shares were already down 5.57% year-to-date and off nearly 20% over the past year. Today’s move erases much of the ground the stock recovered over the past month, when it climbed 7.34% heading into earnings. A Profit Milestone Overshadowed by What’s Ahead XPeng posted its first-ever quarterly net profit in Q4 2025, a genuine milestone for a company that has burned cash since going public. Gross margins hit 21.3%, a record high, reflecting the company’s improving cost structure and pricing discipline even as competitors slashed prices. The delivery surge underpins that profitability story: full-year vehicle deliveries reached 429,445 units, up 125.9% year over year, driving full-year revenues to RMB76.72 billion. That kind of top-line momentum is what made the weak Q1 2026 guidance so jarring for investors. So why is the stock selling off? The Q1 2026 guidance is the culprit. XPeng’s forward outlook signals a “substantial decrease in deliveries and revenue, reflecting current market challenges.” That kind of language after a record quarter is exactly what spooks investors who were hoping the profitability milestone marked a turning point rather than a peak. The China EV market is grinding through a difficult period. Pricing wars among domestic competitors have forced manufacturers to cut prices to maintain volume, and fading government subsidies are removing a tailwind the sector relied on for years. XPeng navigated this well enough in Q4, but the guidance suggests Q1 will feel the pressure more acutely. The Autonomous Driving Bet The bull case on XPeng has never really been about near-term deliveries. Rather, it’s about whether the company can position itself as a physical AI platform rather than just another EV maker. XPeng’s VLA 2.0 autonomous driving system is now deployed in the new P7 Ultra, G7 Ultra, and X9 Ultra models, with nationwide test drives underway across China. The company is also pushing into humanoid robotics with its IRON robot, targeting large-scale production by year-end, using the same underlying VLA architecture. The 2026 delivery target of 550,000 to 600,000 units is ambitious, and XPeng plans to get there with four new SUV models and a meaningful push into European markets. That European expansion is where trade policy risk enters the picture. Tariffs and evolving EU-China trade dynamics could complicate XPeng’s ability to compete on price abroad, which is a real overhang the market is pricing in today.