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Investing.com -- Goldman Sachs upgraded Chinese electric vehicle makers XPeng (NYSE:XPEV) and Nio (NYSE:NIO) on improving cost structures and new product strategies as both firms navigate an intensely competitive domestic market.

The bank raised XPeng to Buy from Neutral and lifted price target to $24 from $18.60, citing improved vehicle competitiveness, stepped-up model launches, and material cost reductions.

Goldman said XPeng’s organizational and supply chain restructuring efforts are beginning to show results, supporting its expectations for more sustainable volume growth and better profit margins.

XPeng’s recent models, including the Mona M03 and P7+, have ranked among the top-selling cars in their segments, Goldman said.

The company is also accelerating its product rollout, planning to launch around 10 new or refreshed models annually, up from one to two in previous years, helping it maintain visibility in a crowded market.

Cost reductions have played a key role, with Goldman noting the company has achieved significant savings through component redesign and sensor suite optimization.

The brokerage estimates that lower bill of materials costs have improved gross margins and lifted profitability on key models.

Goldman also upgraded Nio to Neutral from Sell on early signs that recent operating cost cuts may help ease margin pressures.

It raised its price target slightly to $3.80 from $3.70.

Since March, Nio has implemented cost-saving measures, including project cancellations, headcount reductions, and integration across business units, targeting 20%–25% operating expense savings.

However, Goldman remains cautious on Nio’s volume growth, keeping estimates below company targets due to weaker-than-expected demand and rising industry competition.

It also flagged ongoing cash flow concerns and noted the company’s high debt levels, despite recent capital infusions.

XPeng and Nio are among several Chinese EV makers grappling with thinning margins and volatile consumer demand as new model launches from rivals flood the market.

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