Chinese electric vehicle maker XPeng (XPEV) signed a development deal with mobility and ride-sharing giant Didi, linking two of China’s most prominent tech names.
In an all-stock deal worth $744 million (HK $5.84 billion), Didi will take a 3.25% stake in XPeng in exchange for Didi’s EV and autonomous assets. XPeng will then launch a new “Smart EV” brand in partnership with Didi called Project “MONA,” where the new brand will aim to sell EVs in the 150,000 yuan range, or $20,000. The first Smart EV will be an A-class car (small footprint vehicle) that will come in 2024.
The agreement states that XPeng will become the first automotive company with “comprehensive support from the ecosystem of Didi,” the companies said in a statement. The two companies will also work together on marketing, financial services, charging networks, and autonomous technology for the new brand. The new A-class cars will also operate on Didi’s ride-sharing platform.
“XPeng's A-class Smart EV products under the new brand will not only significantly increase our scale, but also accelerate the adoption of our Smart EV technologies in the mass market segment, bringing our technologies to a much broader customer base," XPeng CEO and chair He Xiaopeng said in a statement.
XPeng shares listed on the NYSE climbed nearly 3% in early trade following the news.
For Didi, signing the development deal with XPeng is a way to carry on its EV and autonomous businesses following setbacks in those divisions. Didi’s EV business — which is housed in a subsidiary named Da Vinci Auto Co. — lost more than $360 million (2.64 billion yuan) last year.
For XPeng, the deal marks yet another big partnership for the company as it expands its EV offerings with other brands. Last month the company announced a strategic partnership with Volkswagen, in which the German auto giant will invest $700 million in exchange for XPeng developing to B-class (small to mid-size) EVs for Volkswagen in the Chinese domestic market.
Analysts at Jefferies were bullish on the deal’s prospects for XPeng, with the bank reiterating its Buy rating on the stock and $25.30 price target.
“The strategic partnership, in our view, will help XPeng to tap the [sub B-class] market and reach the scale effect in a short period of time by leveraging DiDi’s ride-hailing platform," Jefferies’ Hong Kong-based team wrote in a note to clients. "In the long run, Xpeng will also have the natural edge launching robotaxi services backed up by DiDi’s ecosystem.”