Chinese electric vehicle (EV) maker Xpeng said on Monday it would buy ride hailing giant Didi’s EV unit in a deal worth up to $744 million.
Xpeng will supply vehicles to Didi as part of the deal, boosting production and cutting costs at one of China’s smaller EV manufacturers.
Shares in Xpeng shot up 11% in Hong Kong trade on the news, closing up just above 8%.
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As part of the all-stock deal, Xpeng will launch an A-class model next year under a new brand, in a project called MONA.
The vehicle which will be priced in the 150,000 yuan ($20,000) price tier. Xpeng’s current offerings are mostly priced above 200,000 yuan.
“As an EV startup, we are not as skilled as established automakers like Volkswagen in terms of scale and cost management in the 150,000 yuan segment… the partnership with Didi will ensure better-than-expected initial scale for the car and achieve a combination of goals in innovation and supply chain management,” Xpeng Chief Executive He Xiaopeng told Chinese media, according to a company-provided transcript.
He added that the car would also be sold to retail customers and he expects sales of at least 100,000 MONA cars a year.
The deal is another shot in the arm for the currently loss-making carmaker, coming on the heels of a stake sale to, and partnership with, Germany’s Volkswagen.
Tough EV competition in China
The deal is Didi’s first major transaction since its apps were restored to China app stores in January after a regulatory crackdown on its business.
Didi’s development of an EV car had invited speculation that it had ambitions to shift into manufacturing. But the announcement suggests the company is moving in another direction.
Slower demand and excess manufacturing capacity in China’s EV industry have intensified competition and made it hard for relative newcomers such as Didi to enter the market.
Smartphone maker Xiaomi only recently won a regulatory nod to manufacture EVs – two years after first announcing such plans, sources have said.
Xpeng CEO He said in April that he expected to see only eight automakers survive in the Chinese auto market – the world’s biggest – by 2030. That compares with 65 auto manufacturers currently.
Xpeng’s tech win
Didi’s decision to partner with Xpeng over other EV makers likely marked recognition of Xpeng’s technology.
The deal will benefit Xpeng as the sedan Didi has developed would be suitable for selling to other businesses, said Yale Zhang, managing director at Shanghai-based consultancy Automotive Foresight.
“It looks like a very good strategic move,” he said.
Under the deal, Didi will gain around 3.25% of Xpeng, with the EV maker issuing shares at HK$64.03 each, worth $474 million in total. The offer price represents a 1.7% discount to its closing price on Friday.
If vehicle delivery targets are fulfilled, Didi’s stake could climb to 5.26% for a deal value of up to $744 million.
Robotaxis next on radar
Meanwhile, Didi said the two companies will explore strategic cooperation in a number of areas, including marketing, financial and insurance services.
Other possible areas of cooperation include charging, robotaxis and jointly developing an international market. Didi has been working with Chinese carmakers to develop robotaxis which it aims to put in service by 2025.
Xpeng, which is also listed in New York, has been grappling with expanding losses and slumping sales amid an industry-wide price war started by Tesla in January. Its US-listed shares were up 4% in pre-market trade.
The EV-maker sold some 41,000 EVs in the first half, accounting for nearly 2% of battery vehicle sales in China. By comparison, rivals BYD and Tesla sold 550,000 and 294,000 EVs respectively.
- Reuters, with additional editing by Vishakha Saxena
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