XPeng (NYSE:XPEV) has entered into a HK$5.84 billion ($744 million) deal to acquire the smart electric car development unit of DiDi Global (DIDIY). DiDi is China’s largest shared mobility company. The company’s recent strategic move not only eliminates a potential rival from the electric vehicle (EV) market but also opens possibilities for XPEV’s future plans.
Per the agreement, DiDi will receive a 3.25% stake in XPeng. Additionally, DiDi will be restricted from selling these shares for a period of two years following the initial closing of the deal. The deal is slated to remain in effect for a minimum of five years.
As part of the deal, Xpeng aims to launch a new mass-market EV brand called ‘MONA’ next year. Under this name, XPeng will launch an A-class electric car model, costing around 150,000 yuan ($20,580). By offering such affordable EV cars, the company aims to reach a wider consumer base in the hot Chinese EV market.
In addition, both companies plan to explore collaboration on fleet management, marketing, insurance, charging facilities, robotaxis, and expansion into international markets.
Importantly, XPEV has been actively making efforts to grab a larger share of China’s EV market. Last month, XPeng formed a partnership with German automaker Volkswagen AG (VWAGY) to develop two new EVs for the Chinese market. The new cars will bear the Volkswagen brand.
Will XPEV Stock Go Up?
Following the DIDIY acquisition news, analyst Eunice Lee of Bernstein reiterated a Hold rating on the stock, citing doubts about whether MONA can achieve an annual turnover of more than 100,000. Also, the analyst believes that XPeng’s move could result in the “dilution of brand equity by expanding into the mass ride-hailing market. However, this is somewhat alleviated as new models will be developed under a different brand.”
Overall, Wall Street analysts are cautiously optimistic about XPEV stock with a Moderate Buy consensus rating based on eight Buys, three Holds, and three Sells. Meanwhile, the average stock price target of $16.89 implies 3.65% downside potential. The stock has gained about 122.7% over the past three months.
