China's Xpeng to acquire Didi's EV unit in deal worth up to HK$5.84 billion
CHINESE electric-vehicle (EV) maker Xpeng said it would buy Didi’s electric car development business – a deal worth up to HK$5.84 billion (S$1 billion) that will see it supply vehicles to the ride-hailing giant, boosting production and cutting costs.
Shares in Xpeng, one of China’s smaller EV manufacturers and currently loss-making, surged more than 16 per cent in Hong Kong trading on the news before paring gains to close 11 per cent higher. Its American depositary receipts gained 5 per cent by 4.27 am in New York.
The all-stock deal with Didi calls for Xpeng to launch an A-class model next year under a new brand, in a project called Mona, which will be priced in the 150,000 yuan (S$27,918) 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.
Didi’s development of an electric car had invited speculation that it had ambitions to shift into manufacturing, but the announcement – Didi’s first major transaction since its apps were restored to China app stores in January after a regulatory crackdown on its business – suggests the company is moving in another direction.
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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.
Didi, once feted as the national champion that pushed Uber Technologies out of the country, was driven off New York’s main bourse after Chinese regulators launched investigations into the security of its data. The company is gradually resuming its car-hailing expansion.
Didi’s decision to partner with Xpeng over other EV makers likely marked recognition of Xpeng’s technology and 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 per cent of Xpeng, with the EV maker issuing shares at HK$64.03 each, worth US$474 million in total. The offer price represents a 1.7 per cent discount to its closing price on Friday (Aug 25).
If vehicle delivery targets are fulfilled, Didi’s stake could climb to 5.26 per cent for a deal value of up to US$744 million.
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 has been grappling with expanding losses and slumping sales amid an industry-wide price war started by Tesla in January. It has stoked investor concern with its sales decline and weak margins, and was forced to delay its profitability target and overhaul internal management. Xpeng’s US-listed shares were up 4 per cent in pre-market trade.
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 sold some 41,000 EVs in the first half, accounting for nearly 2 per cent of battery-vehicle sales in China. By comparison, rivals BYD and Tesla sold 550,000 and 294,000 EVs respectively. REUTERS, BLOOMBERG
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