Chinese EV startup XPeng announced it is buying ride-hailing company DiDi's smart electric car development business in an exchange of shares worth $744 million.

This will make DiDi a strategic shareholder of XPeng, much like Volkswagen Group, which recently took a 5-percent share of XPeng in a deal worth $700 million. The German automaker also signed a deal to develop two new electric cars for China under the VW brand for launch in 2026. XPeng said it plans to launch an all-new EV brand in 2024, which is currently being developed under the project name "MONA."

The new brand will allow the EV maker to expand in the mass market segment of $20,000 (150,000 yuan) and accelerate the adoption of Smart EV and technologies in this segment that has "enormous market potential." XPeng's cars typically sell for around $27,500 (200,000 yuan) or more.

The inaugural model of the new brand will be an A-segment smart EV that will be differentiated from XPeng-branded products. DiDi will provide support from its mobility ecosystem for the "MONA" project with access to its nationwide shared mobility market. 

Gallery: 2023 XPeng G6

"Project 'MONA' will accelerate the Company's production and sales growth and help achieve greater economies of scale," XPeng said in a joint statement with DiDi. The deal will make XPeng the first automotive manufacturing company with comprehensive support from the ecosystem of DiDi.

The agreement is expected to be completed in stages, with DiDi initially getting 3.25 percent of XPeng with the option to receive more shares if the new mass market car brand does well for an expected total stake of 5.26 percent. The deal stipulates that DiDi cannot sell the shares for two years after the initial closing of the agreement, which is set to last for at least five years.

"As a world's leading mobility technology platform, DiDi shares XPENG's vision of shaping the mobility experience of the future with technology. XPENG's A-class Smart EV products under the new brand will not only significantly increase our scale, but also accelerate the adoption of our Smart EV technologies in the mass market segment, bringing our technologies to a much broader customer base," said XPeng's Chairman and CEO He Xiaopeng.

The two parties said they are also looking to cooperate in marketing, financial and insurance services, charging, robotaxis, and international expansion.

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