In a strategic move that aims to secure its foothold in the electric vehicle (EV) market while fostering technological advancements, Xpeng Inc. has sealed a groundbreaking deal with Didi Global Inc., a dominant player in China’s ride-hailing sector. The partnership, announced in an exchange filing on Monday, not only quashes a potential competitor in the thriving EV arena but also forges an innovative collaboration between the two tech giants.
The landmark all-stock agreement, valued at HK$5.84 billion ($744 million), has sent shockwaves through the market and boosted Xpeng’s shares. With this deal, Didi will obtain a 3.25% ownership stake in Xpeng, a development that holds significant promise for both companies. Xpeng shares experienced a surge of over 16% during Hong Kong trading, ultimately closing 11% higher. Meanwhile, its American depositary receipts gained 5% in New York trading by 4:27 a.m.
A critical facet of the partnership involves the creation of a new EV brand, aptly named Project “MONA,” which is set to debut in 2024. Targeting the mass market segment with an appealing price point of approximately 150,000 yuan ($20,000), these vehicles are expected to make a substantial impact. This strategic venture comes hot on the heels of Xpeng’s recent collaboration with German auto titan Volkswagen AG, marked by a $700 million investment to jointly develop EVs tailored for the Chinese market.
To dispel concerns about waning sales in the face of mounting competition from industry heavyweights like Nio Inc., BYD Co., and Tesla Inc., the partnership with Didi lends Xpeng an additional layer of credibility. Renowned for its investments in autonomous driving technology, Xpeng envisions extensive synergies with Didi across various domains. Collaborations encompass fleet management, marketing, insurance, charging infrastructure, robotaxi services, and global expansion.
For Didi, this strategic move marks a shift away from its aspirations in the car manufacturing business. Once considered a potential avenue for growth, this retreat underscores the evolving landscape of the automotive industry.
Prominent Chinese technology firms, including Didi and Xiaomi Corp., have embarked on endeavors to carve a niche in the capital-intensive EV realm, aiming to enhance vehicles with intelligent features such as autonomous driving and personalized interactions. However, the highly competitive market landscape, characterized by established incumbents and stringent regulatory requirements, has posed challenges for latecomers seeking market share.
Having faced scrutiny from Chinese regulators that led to its removal from the New York Stock Exchange, Didi is gradually regaining momentum in its car-hailing expansion. The company’s value now hovers around $15 billion, a testament to its resurgence after a period of regulatory turbulence.
Xpeng, a nine-year-old player in the industry, recently reported quarterly losses beyond initial projections, reflecting challenges in scaling up deliveries. The company’s efforts to combat sales decline and weak margins led to a delay in its profitability goals and an internal management overhaul.
Under the terms of the agreement, Didi holds the option to elevate its stake in Xpeng to 5% if the new mass-market EV brand manages to achieve 100,000 deliveries for two consecutive years. This stipulation underscores the partnership’s long-term aspirations and shared objectives in the rapidly evolving EV landscape.
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