Magna International (NYSE: MGA) has announced a new vehicle assembly agreement with Chinese electric vehicle manufacturer XPeng. This partnership is set to bolster Magna's European operations and marks a strategic move for XPeng to expand its presence in the European market.

U.S. equities saw focused attention on the automotive sector as Magna International (NYSE: MGA), a prominent Canadian auto component supplier, announced a significant new vehicle assembly deal. The partnership, forged with Chinese electric vehicle (EV) manufacturer XPeng, is expected to invigorate Magna's European business, particularly its "Complete Vehicle" division, which has faced slumping assembly volumes.

The Event in Detail

On September 15, 2025, Magna International confirmed it has been selected by XPeng to assemble two new smart electric vehicle models for the European market. Serial production of these models is slated to commence in Q3 2025 from Magna's operations in Graz, Austria. This collaboration represents Magna's first complete vehicle assembly agreement with a Chinese OEM in Europe. The initial models to be assembled are believed to be the XPeng G6 and G9 SUVs.

This strategic move allows XPeng to leverage localized production in Europe, a crucial step for the Chinese EV maker to navigate potential European Union tariffs on imported Chinese electric vehicles, which can be as high as 35.3% for some manufacturers. By assembling vehicles locally, XPeng aims to enhance its competitiveness and solidify its long-term commitment to the European market. Magna has a long-standing history of supporting Chinese automakers, providing complete vehicle engineering since 2005 and domestic manufacturing and assembly services since 2018.

Analysis of Market Reaction and Strategic Impact

The announcement is viewed positively for Magna International, offering a potential catalyst for its stock performance (MGA) after what has been described as an "underwhelming journey" compared to its peers in the automotive sector. While other auto-based stocks (represented by the CARZ ETF) and smart mobility stocks (HAIL ETF) have seen gains exceeding 20% year-to-date, MGA has lagged with low double-digit gains.

The deal is particularly significant for Magna's Complete Vehicles (CV) division, its smallest segment, accounting for approximately 12% of overall annual revenue and historically less profitable. This division experienced a 32% decline in assembly volumes last year and an 18% decline in the first half of this year, following the cessation of production for models like the Jaguar I-Pace, Jaguar E-Pace, and BMW 5-Series. The partnership with XPeng could provide a much-needed volume boost, especially if it extends to future models, including XPeng's mass-market model, Mona, which has a relatively low ticket price of around $17,000.

For XPeng, localized production in Europe through Magna Steyr is a critical component of its expansion strategy, allowing it to meet regulatory standards, avoid tariffs, and cater more effectively to European consumer preferences. The company has been actively expanding its overseas presence, with a 217% increase in overseas vehicle sales from January to July compared to the previous year.

Broader Context and Implications

Despite the positive news from the XPeng deal, Magna's recent financial performance has shown some challenges in a rapidly evolving competitive landscape. In Q4 2024, the company reported stagnant year-on-year revenue growth of 0%, significantly trailing its competitors' average revenue growth of 799.02%. While Magna demonstrated higher profitability with a net margin of 2.56%, its net income growth also lagged, highlighting the need for enhanced revenue performance.

Technically, MGA stock has shown some potentially bullish indicators, with a series of higher-highs and higher-lows, and regaining the 200-day moving average in July. A "golden cross pattern" (50-day moving average overtaking the 200-day moving average) has also been observed recently, following a "death cross" in March 2024 that preceded a 44% decline. Furthermore, Magna recently lifted its group topline forecast for the full year from $40.8 billion to $41.2 billion and reduced its forecast for adverse tariff impacts. The company also offers a dividend yield of over 4.1%, which is attractive compared to the industry average of around 2.5%, and has a history of growing dividends for over three decades.

Expert Commentary

Executives from both companies expressed optimism regarding the partnership.

"We are thrilled to collaborate with XPENG, marking a significant milestone as our first Chinese OEM partner here in Europe," said Roland Prettner, President Magna Complete Vehicles. "This partnership underscores our commitment to innovation and flexibility in meeting the evolving needs of the automotive industry."

Brian Gu, Vice Chairman and President of XPeng, echoed this sentiment:

"Our partnership with Magna fits perfectly in our vision and strategy to strengthen our European capabilities. It is a first step in our growth in Europe as we have a long-term commitment to Europe."

Looking Ahead

The collaboration between Magna International and XPeng is expected to be a long-term endeavor, with discussions for future models already underway. The successful execution of the assembly of the G6 and G9 models will be crucial in demonstrating the potential for this partnership to significantly boost Magna's Complete Vehicles division. Investors will be closely watching for updates on production volumes, especially the potential involvement with XPeng's mass-market Mona model, which could provide substantial volume growth. Additionally, Magna's ability to leverage this partnership to improve its overall revenue growth trajectory relative to its competitors will be a key factor in assessing its long-term market positioning.