XPeng to buy Didi's smart car business for $774 million

Chinese EV company XPeng (XPEV) announced that it will be buying Didi's (DIDIY) smart car unit in a deal worth up to $774 million. Yahoo Finance Reporter Pras Subramanian explains the advantages of the deal, saying that “XPeng is getting Didi’s expertise with ride-hailing and autonomous technology.” Subramanian notes the competitiveness within the Chinese EV space and that XPeng’s new deal with Didi could help it get an edge over the competition.

Video transcript

RACHELLE AKUFFO: Let's also take a look at what we're seeing with shares of Xpeng or Xiaopeng moving higher today after the Chinese EV company announced it will be buying Didi's smart car development business in a deal worth $744 million. For more details, we're joined by Yahoo Finance's Pras Subramanian. Hey, Pras.

PRAS SUBRAMANIAN: Hey, Rachelle. So yeah, this is actually an all-stock deal where Didi will own 3.25% of Xpeng following the stock transfer. But yeah, basically, Xpeng is getting Didi's expertise with ride hailing and autonomous technology. And as part of the deal, Xpeng will launch a new EV brand with Didi called Project Mona.

The cars will be relatively cheap, around $20,000. The companies will work together on marketing, financial services deals, charging, and, of course, a robotaxi network. So for Didi, it's sort of-- the company had faced setbacks in its EV and autonomous endeavors. This is perhaps a way forward for them to work with Xpeng.

And remember Didi was delisted from the NYSE last year during that Chinese government crackdown. So for Xpeng, it's another big deal for the company now. They just signed a deal with VW for around $700 million to make a couple of new EVs for the Chinese domestic market. So another thing here, another big peg here for Xpeng in China.

BRAD SMITH: Then additionally here, Pras, when we think about the moves that are set to come forward, I mean, we're set to not just watch Xpeng, but we've also got NIO reporting later on this week. So if we think about these EV plays within China and how they're starting to, kind of, make themselves not just more known but where consumers are gravitating towards them, is there any clear winner that we're seeing?

PRAS SUBRAMANIAN: Oh, it's a very competitive space, a lot of domestic players there. And I think there's this, sort of, struggle to see who's going to be coming out on top. And you have companies like BYD, and Li Auto, and other companies that do stuff like range extending cars with EVs that use batteries to extend the range of their gas engines. So that's a whole other thing that happens in China.

But I think with Xpeng, it's another way for them to notch their way higher into that space. And signing with Didi, it's a well known name in China, it's, kind of, a big deal for them like a feather in their hat. And then also, I think for Xpeng it's a way to get all that technology that Didi has, all that data they have from all the ride hailing stuff they've been collecting. So it's another big technology move for them.

So I think it's a way for them maybe to clear the space, get a bit more breathing room and maybe, kind of, leapfrog some of their competitors in that really competitive Chinese EV market.

BRAD SMITH: Interesting.

RACHELLE AKUFFO: And Didi has always been very creative about this. I remember when at first it was just considered the Uber of China, and then it, sort of, nudged Uber out of the way a bit. So to see its evolution is really interesting. What are some of the other partnerships that you think perhaps Didi could benefit from as you do have a very competitive EV space in China?

PRAS SUBRAMANIAN: You're seeing with Didi in terms of their EV endeavors, I think Xpeng is a great option for them. Xpeng's cars are actually pretty popular in the sense that they're very sporty looking. They're like a competitor to Tesla in some sense or operating at that level, not at that scale, though, but definitely at that level.

And I think if you partner with, like you said, Didi, who's well known in the country, it, sort of, gives Xpeng a way to compete with Tesla and their FSD and their autopilot, which I've been hearing FSD is coming to China soon. The question is, will regulations or regulatory people allow that to happen in that country? But yeah, it's another-- I think it's a big tie-up between two big companies. Think like Uber and GM joining forces, right? That's, sort of, what we're talking about.