Shares of Chinese electric vehicle (EV) manufacturer Xpeng (NYSE: XPEV) experienced a notable 14.36 percent surge in early Hong Kong trading, reaching HK$74.45 and marking its highest level since August 7. The surge, the most significant one-day gain since July 27, comes hot on the heels of Xpeng's announcement of its acquisition of the EV business of Didi Global, a prominent Chinese ride-hailing giant.
In a strategic move, Xpeng unveiled its agreement to purchase the assets pertaining to Didi's smart car development business. The acquisition will encompass various aspects including research and development, design, and engineering of novel smart electric vehicles. The transaction carries a value of up to HK$5.835 billion ($744 million). Xpeng is set to issue class A ordinary shares, equivalent to approximately 3.25 percent of the company's total issued share capital upon the deal's completion, in exchange for the assets linked to Didi's EV program.
Notably, this acquisition positions Didi as a strategic shareholder in Xpeng. The collaboration intends to give rise to a fresh EV brand, anticipated to be launched in 2024. Dubbed the “Mona” project, it will serve as a platform for Xpeng's expansion into the RMB 150,000 ($20,630) price range of the mass market segment. The initiative is expected to accelerate Xpeng's production and sales growth, while simultaneously facilitating the realization of greater economies of scale.
The inaugural model under the “Mona” program is slated to be an A-class smart electric vehicle, with its market introduction scheduled for 2024. Notably, this new model and brand will maintain distinction from Xpeng's existing branded products and primary brand.
An intriguing aspect of the Xpeng-Didi deal is the establishment of performance-based incentives, contingent on the volume production of the “Mona” vehicles and Didi's attainment of specific sales targets. These incentives are designed to be share-based, signifying a level of alignment in the interests of both companies.