Xpeng Motors has begun building another electric car plant in China. The Chinese manufacturer intends to expand its production capacities beyond the existing plant in Zhaoqing. The new production facility in Guangzhou is set to go into operation at the end of 2022.
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Xpeng Motors is based in the south of China in the province of Guangdong where the company’s second plant will be built. To finance the new production facility, the company founded in 2014, has now signed a cooperation agreement with the investment company Guangzhou GET Investment.
Guangzhou GET Investment is supposed to invest 1.3 billion yuan (around 160 million euros) in the construction of the plant. It will lease it to Xpeng Motors for seven years after completion before the manufacturer takes over the site itself. The partners are proceeding similarly with the equipment for the equivalent of around 150 million euros. All in all, the investment company has agreed to provide funds of 4 billion yuan, or around half a billion euros, for the growth of the young company.
Xpeng Motors says that it currently has an annual production capacity of 100,000 vehicles in Zhaoqing. As yet, Xpeng has not previously published any key figures for the new factory, saying only: “XPeng’s new Smart EV Manufacturing Base in Guangzhou will significantly expand the Company’s production capacity and accelerate XPeng’s momentum to achieve its goals in innovation, technological advancement and growth.”
The company’s CEO He Xiaopeng said that the site for the plant was in great demand: “We are very excited to be selected as a key player in the Guangzhou Economic and Technological Development Zone,” says Xiaopeng, who also praises the “strong support from the Guangzhou government.” This is not at all unusual in China, where regional governments sometimes even become direct investors in companies from strategically essential industries. This was recently the case at WM Motor when the most recent round of financing was co-led the Shanghai Municipal Asset Monitoring and Management Commission.
At the end of June, Xpeng launched its second production model, the P7, on the Chinese market. The overall situation is challenging for the young manufacturer. Xpeng is only active in China where the sales of electric cars have been declining since purchase subsidies for electric cars were cut a good year ago. However, the latest figures show a countering stabilisation. To counteract this, Xpeng, like its competitor Nio, has, among other things, decoupled battery costs from the purchase price of its vehicles. Since this month, customers have the option of either buying the battery or renting it over a period of seven years. This has the advantage of theoretically upgrading the battery without necessarily having to upgrade the vehicle. For the time being, however, the service will only be offered for selected versions of the G3 and P7.
In addition to the investment agreement with Guangzhou GET Investment announced above, the company has completed financing rounds of 500 and 400 million dollars within a few months. The company is about to go public on the US stock exchange, from which the manufacturer expects gross proceeds of around 1.5 billion dollars whereby 99.7 million shares are to be issued at a unit price of 15 dollars.
Update 12 January 2020: Xpeng has secured a credit line totalling 12.8 billion yuan (about 1.63 billion euros) from five Chinese commercial banks to support its business operations and expand its production, sales and service capabilities. The company also announced its third model this week, which is another electric-sedan.
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