Chinese electric car company Xpeng announced on Monday that it will acquire Didi’s smart electric car development business in a share exchange worth $744 million. This move will make Didi a strategic shareholder of Xpeng, and the two companies plan to collaborate in various areas, including marketing, finance and insurance services, charging infrastructure, robotaxi services, and international expansion.
In response to the announcement, Xpeng’s shares in Hong Kong trading rose by more than 13% on Monday morning.
With this partnership and the addition of Didi’s assets, Xpeng aims to launch an affordable electric car under a new mass market brand in 2023. The car will target the price range of 150,000 yuan ($20,580), which is lower than Xpeng’s current models that typically sell for around 200,000 yuan or more.
This deal comes as multiple companies are trying to capture a share of China’s fast-growing but competitive electric car market. Earlier in July, Xpeng signed a deal with German auto giant Volkswagen to develop two electric cars for the Chinese market under the VW brand.
However, it’s worth noting that Xpeng is still operating at a loss. In Q2 of this year, the company reported a net loss of 2.8 billion yuan ($384.5 million), which exceeded analysts’ expectations and marked its largest quarterly loss since going public three years ago. Xpeng’s monthly car deliveries have also remained low compared to competitors like BYD and Li Auto.
Didi’s electric car business, operated by its subsidiary Da Vinci Auto Co., has also faced losses. According to a Hong Kong stock exchange filing, the business’s losses for 2022 tripled from the previous year to 2.64 billion yuan. Despite these challenges, Xpeng plans to consolidate Da Vinci Auto Co.’s financials into its own statements after the acquisition.
The deal between Xpeng and Didi is expected to be completed in stages, and Didi will receive additional shares if the new mass market brand performs well, potentially giving Didi a total stake of 3.25% in Xpeng. However, Didi is restricted from selling these shares for two years after the initial closing of the deal. The strategic cooperation agreement between the two companies is set to last for at least five years.
Didi has previously faced setbacks in its business, including delisting from the New York Stock Exchange and undergoing a government probe. While its stock is still tradeable over-the-counter, plans for a Hong Kong listing remain uncertain.
In conclusion, Xpeng’s acquisition of Didi’s smart electric car development business marks a significant step for both companies in the competitive Chinese electric car market. The strategic partnership and collaboration between these two industry players have the potential to drive innovation and growth in the sector.
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