Alibaba reduces its stake in Chinese EV maker XPeng
On Friday, Alibaba revealed plans to sell some of its shares in XPeng, and the EV maker’s stock dropped by over 8% the same day as a result.
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The backstory: XPeng, the Chinese electric vehicle (EV) maker, burst onto the scene in 2014, ready to take on big players like Tesla and BYD. Setting itself apart from the traditional car crowd, XPeng positioned itself as a tech powerhouse, venturing into everything from robots to drones.
In 2019, Alibaba's arm, Taobao China, grabbed a chunk of XPeng's shares leading up to its public market debut. Beyond financial backing, XPeng and Alibaba have joined forces in the autonomous driving arena, leveraging a high-tech computing center fueled by Alibaba Cloud. They’ve also been working on in-car payments by integrating Alibaba's Alipay.
More recently: XPeng recently hit a bit of a rough patch, showing a bigger loss than expected in the third quarter, despite nailing it with deliveries in the fourth quarter. But the company will end up shipping fewer than 150,000 vehicles for the year, way less than direct competitors like BYD.
The development: On Friday, Alibaba revealed plans to sell some of its shares in XPeng, and the EV maker’s stock dropped by over 8% the same day as a result. Taobao plans to sell 25 million XPeng shares, worth around US$391 million based on Thursday's closing price, according to a filing with the US Securities and Exchange Commission (SEC). The shares being sold are linked to that chunk that Taobao grabbed in 2019. As of early this month, Taobao held about 10.2% of XPeng’s outstanding shares, and it’s the second-largest shareholder of the company after founder He Xiaopeng.
Through a spokesperson, Alibaba explained that this move is part of its plan to manage the company's investments better and emphasized that it still values its partnership with XPeng and believes in the company's future. XPeng, on the other hand, said Alibaba selling some shares is just a way for it to cash in on its investments and doesn't mean Alibaba is changing its outlook. Alibaba will still be the second-largest shareholder in XPeng, with a 7.5% stake.
Key comments:
“Consistent with our capital management objectives, we sold a portion of our holdings in XPeng Inc., taking our stake from 10.2% to 7.5%,” said an Alibaba spokesperson in a statement. “We have a strategic relationship with XPeng, which is one of China’s leaders in electric vehicles. We believe in XPeng’s prospects and look forward to continued cooperation with the company.”
For XPeng, “training of the EV maker’s autopilot system may now be in question” given that Alibaba has been a key cloud provider, said Xiadong Bao, a fund manager at Edmond de Rothschild Asset Management.
“I believe the time has come for Chinese brands,” BYD chairman Wang Chuanfu said at a BYD event earlier this year. “It’s an emotional need for the 1.4 billion Chinese people to see a Chinese brand becoming global.”
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