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Chinese ride-hailing firm Didi Global has agreed to sell its electric vehicle (EV) arm to EV maker Xpeng in exchange for shares worth HK$5.84 billion (US$744 million), exiting a once promising business that is now crowded with 200-odd players.
Guangzhou-based Xpeng will issue the shares at HK$64.03 apiece to pay for the asset, according to their exchange filings on Monday. Beijing-based Didi, which was slapped with an 8 billion yuan (US$1.1 billion) fine for data violations, will own 3.25 per cent of Xpeng's enlarged capital.
"The Chinese EV market has great potential, but latecomers now have slim chances of making a success due to fierce competition," said Cao Hua, a partner at Shanghai-based private equity firm Unity Asset Management, which invests in vehicle supply-chain firms. "The deal enables Xpeng to take advantage of Didi's business platforms to promote its vehicles while helping Didi dodge the cutthroat market before its designed models go into production."
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The Didi Global headquarters in Beijing, pictured on June 9, 2022. Photo: Bloomberg alt=The Didi Global headquarters in Beijing, pictured on June 9, 2022. Photo: Bloomberg>
The move follows Volkswagen Group's US$700 million investment in Xpeng in July for a 4.99 per cent stake. The two companies plan to roll out two VW-badged midsize EVs in 2026 on the mainland.
Xpeng jumped 10.9 per cent to HK$72.20 in Hong Kong in a bullish market as the Hang Seng Index logged a 1 per cent gain. Didi declined 2.2 per cent to US$3.17 in over-the-counter trading in New York on Friday.
Didi will continue to "deepen our cooperation with Xpeng in multiple areas, driving transformation of the transportation and automotive industries", Cheng Wei, chairman and CEO of Didi, said in a statement on Monday.
He Xiaopeng, Xpeng's co-founder and CEO, said the EV start-up will explore working with Didi in certain fields such as marketing, insurance service, charging, robotic taxis and international expansion as the two pursue a leading position in the future of mobility.
"Both parties will explore cooperation opportunities in various areas," he said in a statement. "Xpeng will continue to create value and capture growth opportunities in the mobility ecosystem as well as in autonomous driving."