Chinese electric vehicle maker XPeng (XPEV) has signed a development agreement with ride-sharing giant Didi, linking two of China’s most prominent technology names.
In an all-share deal valued at $744 million (HK$5.84 billion), DiDi will acquire a 3.25% stake in XPeng for DiDi’s electric and self-driving car assets. Xpeng will then launch a new “Smart EV” brand in partnership with Didi called the “MONA” project. The new brand will aim to sell electric vehicles in the 150,000 yuan, or $20,000 range. The first smart electric vehicle will be a Class A (small-sized vehicle) that will come in 2024.
The agreement states that Xpeng will become the first auto company with “comprehensive support from Didi’s ecosystem.” The companies said in a statement. The two companies will also work together on marketing, financial services, shipping networks and standalone technology for the new brand. The new A-Class cars will also run on Didi’s ride-sharing platform.
“Xpeng’s Smart EV products under the new brand will not only significantly increase our volume, 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 CEO Chair said Xiaopeng said in a statement.
Shares of NYSE-listed XPeng were up nearly 3% in early trade after the news.
For Didi, signing a development agreement with XPeng is a way to continue its electric and autonomous vehicle business after setbacks in those divisions. Didi’s electric car business — which is headquartered in a subsidiary called Da Vinci Auto Co. – Over 360 million dollars (2.64 billion yuan) last year.
For XPeng, the deal marks another major partnership for the company as it expands its electric vehicle offerings with other brands. company last month Announced a strategic partnership with Volkswagenin which the German auto giant will invest $700 million in developing XPeng into B-segment (small to medium-sized) electric cars for Volkswagen in the Chinese domestic market.
Analysts at Jefferies were optimistic about the deal’s prospects for XPeng, as the bank reiterated the buy rating on the stock and price target of $25.30.
“The strategic partnership, in our view, will help XPeng to tap into the market (sub-category B) and reach volume impact in a short period of time by leveraging DiDi’s platform for passenger transportation services,” the Hong Kong-based Jefferies team wrote. In a note to clients. “In the long term, Xpeng will also have a natural advantage in launching taxi bot services powered by the DiDi ecosystem.”
Pras Subramanian is a correspondent for Yahoo Finance. You can follow it Twitter and on Instagram.
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