Shares of XPeng Inc. skyrocketed toward an 11-month high Wednesday, after Germany-based Volkswagen Group said it was investing $700 million in the China-based electric vehicle maker as it follows its “local electrification” strategy.
Under the terms of the investment, VW will take a 4.99% stake in XPeng through the purchase of stock at $15 per American depositary share, which represents a 2.3% discount to Tuesday’s closing price of $15.36.
“The aim is to swiftly tap into new customer and market segments, thereby systematically leveraging the potential of China’s dynamically growing e-mobility market,” VW said in a statement.
XPeng’s stock
XPEV,
shot up 32.9% in morning trading, putting them on track for the highest close since Aug. 22, 2022. The stock was also headed for its second-biggest one-day rally since it went public on Aug. 27, 2020, behind only the record 47.3% run up on Nov. 30, 2022.
The rally helped boost shares of XPeng’s China-based rivals, as Nio Inc.’s stock
NIO,
charged up 9.4% and Li Auto Inc. shares
LI,
climbed 4.2%. Shares of Texas-based competitor Tesla Inc.
TSLA,
which generated 23% of its total second-quarter revenue in China, edged up 0.3%.
Volkswagen’s U.S.-listed shares
VWAGY,
VOW,
fell 1.4%.
The investment includes a cooperation agreement between the VW brand and XPeng, which will provide for the joint development of two VW brand electric models for the midsize segment in China. The vehicles are slated to be rolled out in 2026.
“Local partnerships are an important building block in the Volkswagen Group’s ‘in China for China’ strategy,” said Ralf Brandstätter, a Volkswagen AG board member for China. “With XPENG, we now have another strong partner that is one of the leading manufacturers in China in key technology areas,” Brandstätter added.
Separately, VW said its Audi subsidiary entered into signed a strategic memorandum with its China-based joint-venture partner SAIC Motor Corp. Ltd.
600104,
to expand their current cooperation agreement. The company’s plan to “swiftly and efficiently” extend the portfolio of EVs in the premium segment.
