Xpeng, one of China’s leading electric car makers, announced on Monday that it will acquire Didi’s smart electric vehicle (EV) unit and form a strategic partnership with the ride-hailing giant. The deal, which could be worth up to $744 million, is expected to boost Xpeng’s production and sales growth and help it achieve greater economies of scale.
Didi’s smart EV unit, which was established in 2018, has been developing autonomous driving technology and customized EVs for mobility services. Didi has been working with several Chinese carmakers, such as BYD and BAIC, to produce EVs under its own brand. However, the unit has faced challenges in entering the highly competitive and saturated EV market in China, which has seen slowing demand and excess manufacturing capacity.
Xpeng, on the other hand, has been growing rapidly in the premium EV segment, competing with Tesla and Nio. The company, which was founded in 2014, has two models in its portfolio: the G3 SUV and the P7 sedan. Both vehicles feature advanced smart features, such as voice control, facial recognition, and autonomous driving. Xpeng has also been expanding its global presence, launching its vehicles in Norway and launching an initial public offering (IPO) in the US last year.
A new brand for the mass-market segment
As part of the deal, Xpeng will launch an A-class model next year under a new brand, currently called MONA, aiming to expand in the mass-market segment with the car to be priced in the $20,000 price tier. The new brand will leverage Didi’s smart EV unit’s technology and experience in developing customized vehicles for mobility services.
MONA will target young and urban consumers who value affordability, convenience, and sustainability. The brand will also offer a range of services and benefits for its customers, such as access to Didi’s mobility platform, financial and insurance products, charging facilities, and robotaxi options. Xpeng said that MONA will help it diversify its product portfolio and reach a wider customer base.
Didi will support the launch of MONA by providing access to its mobility market and exploring strategic cooperation with Xpeng in various areas. Didi will also acquire around 3.25% of Xpeng shares under the deal, which could increase depending on whether production and sales targets are fulfilled. The likely maximum deal value of $744 million includes potential milestone payments.
A win-win situation for both parties
The deal is seen as a win-win situation for both Xpeng and Didi, as they can leverage each other’s strengths and resources to create synergies and enhance their competitiveness in the EV industry.
For Xpeng, the deal will allow it to tap into Didi’s massive user base and data resources, which could help it improve its customer acquisition and retention strategies. Xpeng will also benefit from Didi’s expertise and network in the mobility service sector, which could help it optimize its vehicle design and functionality for different use cases and scenarios.
For Didi, the deal will enable it to focus on its core business of providing mobility services, while still maintaining a stake in the EV market through its partnership with Xpeng. Didi will also be able to reduce its capital expenditure and operational costs by outsourcing its EV production to Xpeng. Moreover, Didi will be able to enhance its service quality and efficiency by using MONA vehicles for its platform.
The deal comes amid regulatory pressures and uncertainties for both companies in China. Didi has been facing a crackdown by Chinese authorities over its data security practices since its US IPO in June. Xpeng has been facing challenges from Tesla over alleged intellectual property theft and unfair competition. The deal could help both companies mitigate some of these risks by strengthening their collaboration and innovation capabilities.