The smart electric vehicle (EV) division of ride-hailing behemoth Didi will be acquired by Chinese electric car startup Xpeng (9868. HK) in a deal that could be valued at up to $744 million, and the two businesses will collaborate strategically.
The price of Xpeng shares increased by almost 13% on Monday.
In accordance with the agreement, Xpeng will introduce an A-class model the following year under a new name—MONA—with the intention of growing in the mass-market segment. The automobile will start at around $20,000.
According to a statement from Xpeng, “Project ‘MONA’ will accelerate the Company’s production and sales growth and help achieve greater economies of scale.”
The agreement comes at a time when China’s EV industry is experiencing declining demand and surplus production capacity, making it challenging for relative newcomers like Didi to get into the market. Two years after originally declaring such plans, smartphone manufacturer Xiaomi (1810.HK) just recently received regulatory approval to produce EVs, according to sources.
Didi stated it will help the launch by “providing access to its mobility market” and the two businesses will explore strategic cooperation in a number of sectors, including marketing, financial services, and insurance services.
Charging, robotaxis, and cooperatively creating a global market are more potential collaboration opportunities. Didi has been developing robotaxis with Chinese automakers with the goal of launching them by 2025.
According to the agreement, Didi will acquire about 3.25% of Xpeng shares, however, this percentage may rise if production and sales goals are met. Potential milestone payments are included in the estimated $744 million deal value maximum.
Promoting the global application of smart electric vehicles and technologies
Another notable partnership that the Tesla rival has formed recently is the $744 million purchase by Chinese electric vehicle upstart Xpeng of Didi’s smart EV assets.
Didi announced on Monday that the two are joining forces to “promote the global application of smart electric vehicles and technologies.”
Notably, the Didi assets will be incorporated into a new sub-brand dubbed “Mona” under Xpeng, which is planned to debut in 2024. In addition, the cooperation covers marketing, financial insurance services, billing, and global expansion.
The announcement came shortly after Volkswagen announced its $700 million investment in Xpeng, which would enable the company to produce two new automobiles bearing the Volkswagen name and utilizing key XPeng ADAS technologies.
Xpeng’s adoption of EVs is still extremely restricted, accounting for just 2.1% of China’s new energy vehicle market (including hybrids) in 2022 despite significant R&D expenditures. It might be possible for it to reach hundreds of millions of Chinese users through a deal with Didi.
Didi reported 587 million active users for the year that ended in Q1 2023.