Chinese EV-maker XPeng plunges after Alibaba plans stake sale

US-traded shares of XPeng slumped on Friday (Dec 15) after Alibaba Group disclosed a plan to cut its stake in the Chinese electric vehicle (EV) maker.

XPeng shares tumbled as much as 8.6 per cent on Friday after a Securities and Exchange Commission filing showed that Taobao China, an Alibaba subsidiary, intends to sell 25 million of XPeng’s American depositary receipts. The stake was worth about US$391 million, based on XPeng’s closing share price on Thursday.

“Consistent with our capital management objectives, we sold a portion of our holdings in XPeng, taking our stake from 10.2 per cent to 7.5 per cent,” an Alibaba spoksperson said.

“We have a strategic relationship with XPeng, which is one of China’s leaders in electric vehicles. We believe in XPeng’s prospects and look forward to continued cooperation with the company.”

XPeng said Alibaba’s plan to trim its stake is implementation of a strategy to monetise investment and not a reflection of a view change, local media Cailian reported, citing XPeng. Alibaba will remain the EV maker’s second-largest shareholder after the stake reduction, it added.

Taobao China held about 10.2 per cent of XPeng’s outstanding shares, according to a Dec 6 filing. The Alibaba unit was the second-largest shareholder in XPeng as at end-March, after founder He Xiaopeng, according to the Guangzhou-based EV maker’s latest annual report. Taobao is selling shares acquired in September 2019 as part of a pre-initial public offering investment, Friday’s filing showed. 

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The companies have also partnered in other areas, with XPeng’s autonomous driving capabilities backed by a computing centre that it set up with Alibaba Cloud. The EV maker is also developing in-car payment features with Alibaba affiliate Alipay.

For XPeng, “training of the EV maker’s autopilot system may now be in question” given that Alibaba has been a key cloud provider, said Bao Xiadong, a fund manager at Edmond de Rothschild Asset Management. The company could still count on other backers, including Volkswagen, he added.

Alibaba shares rose as much as 4.2 per cent on Friday, after having languished this year. Its market value was overtaken by rival PDD earlier this month, prompting founder Jack Ma to urge the company to correct its course in an internal memo.  

Alibaba’s plan to trim its XPeng stake shows that the Internet giant is turning its focus onto its core businesses, according to Bao. “Unlocking the shareholder value and refocus on its essential business lines are really the priority for Alibaba,” he said.

XPeng reported a wider-than-expected third-quarter loss last month, and even with the record fourth-quarter deliveries it will ship fewer than 150,000 vehicles for the year – a fraction of rivals such as BYD Co. 

XPeng, meanwhile, has attracted other investors. In July, Volkswagen said it will invest US$700 million in the company and jointly develop EVs in China. The German carmaker will eventually hold a 4.99 per cent stake in XPeng via a capital increase and is getting an observer board seat. BLOOMBERG