XPeng Inc (NYSE:XPEV) announced Monday that the Chinese electric vehicle startup will, be acquiring the smart EV assets of ride-hailing giant DiDi (OTC:DIDIY) for $744 million. DiDi said the duo is forming a strategic partnership to “promote the global application of smart electric vehicles and technologies.”
According to XPeng’s announcement, the company will issue A-class ordinary shares to fund the purchase. XPeng will issue ~3.25% of its outstanding shares upon completion of the issuance if all conditions apply. DiDi will also become a shareholder in XPeng, with a lock-up period of 24 months.
Bernstein analysts wrote in a note “The deal will help XPeng scale faster, which is positive for XPeng's cost structure. It could also help XPeng collect driving data for the development of its autonomous driving solutions.”
By leveraging the smart EV project, currently under the name "MONA," the company plans to roll out a brand-new electric vehicle in 2024 for everyday consumers, priced at around RMB150K ($1 = RMB7.2933). The first model will hit the market in the same year.
As per the company's statements, DiDi has largely finished the research and development efforts for the new model, and XPeng intends to enhance it by integrating its XNGP software. In alignment with the agreement and collaboration, XPeng will bring aboard a portion of DiDi's staff and gain distribution access to the ride-hailing market.
An additional stock incentive linked to performance has also been added, tied to the mass production of "MONA" and the achievement of sales volume goals by DiDi. If DiDi surpasses an annual volume of 100K, it will gain extra shares from XPeng. This could potentially result in an additional allocation of up to 1.75% of shares, ultimately leading to a total 5% ownership stake in XPeng if an annual volume of 180K is attained.
Morgan Stanley analysts added, “We think the collaboration will enable XPeng to swiftly and efficiently develop its presence in the RMB150K market by leveraging DiDi's nationwide shared mobility market, channel resources, insurance, charging stations as well as global presence.”
The brand will be based on DiDi's platform but be differentiated from XPeng-branded cars. To realize mass production, XPeng will use current bases to produce the cars and have additional investment in manufacturing and R&D, which management said would be "a manageable amount".
Shares of XPEV are up 5.31% in premarket trading Monday morning.