DOMESTIC electric car company Xpeng Inc. will acquire ride-hailing giant Didi Global Inc.’s smart electric vehicle (EV) unit in a deal worth as much as US$744 million and the two companies will form a strategic partnership.

As part of the deal, Xpeng plans to launch a new EV brand in partnership with Didi in 2024 under a new brand, currently called MONA, aiming to expand in the mass-market segment with the car to be priced in the US$20,000 price tier.

The partnership comes just over a month after Xpeng received a US$700 million investment from German auto giant Volkswagen AG to jointly develop EVs for the Chinese market.

The deal also comes amid slowing demand and excess manufacturing capacity in China’s EV industry that has made it hard for relative newcomers such as Didi to enter the market.

Xpeng, which has invested heavily in autonomous driving features, said it would explore collaborations with Didi on fleet management, marketing, insurance, charging facilities, robotaxis and international markets.

Didi will 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 US$744 million includes potential milestone payments.

For Didi, the deal marks a retreat from the car-making business, once considered a potential driver of growth for the car-hailing giant. (SD-Agencies)