Chinese EV-Maker XPeng Plunges After Alibaba Plans Stake Sale

Evelyn Yu and Henry Ren, Bloomberg News

(Bloomberg) -- US-traded shares of XPeng Inc. slumped Friday after Alibaba Group Holding Ltd. disclosed a plan to cut its stake in the Chinese electric vehicle maker.

XPeng shares tumbled as much as 8.6% on Friday after a Securities and Exchange Commission filing showed that Taobao China Holding Ltd., an Alibaba subsidiary, intends to sell 25 million of XPeng’s American depositary receipts. The stake was worth about $391 million, based on XPeng’s closing share price on Thursday.

“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%,” an Alibaba spoksperson said 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.”

XPeng said Alibaba’s plan to trim its stake is implementation of a strategy to monetize investment and not a reflection of a view change, local media Cailian reported, citing XPeng. Alibaba will remain the EV maker’s second-largest shareholder after the stake reduction, it added.

Taobao China held about 10.2% of XPeng’s outstanding shares, according to a Dec. 6 filing. The Alibaba unit was the second-largest shareholder in XPeng after founder He Xiaopeng as of end-March, according to the Guangzhou-based EV maker’s latest annual report. Taobao is selling shares acquired in September 2019 as part of a pre-initial public offering investment, Friday’s filing showed.

The companies have also partnered in other areas, with XPeng’s autonomous driving capabilities backed by a computing center that it set up with Alibaba Cloud. The EV maker is also developing in-car payment features with Alibaba affiliate Alipay.

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. The company could still count on other backers, including Volkswagen AG, he added.

Alibaba shares rose as much as 4.2% on Friday, after having languished this year. Its market value was overtaken by rival PDD Holdings Inc. earlier this month, prompting founder Jack Ma to urge the company to correct its course in an internal memo.

Read more: Jack Ma Returns to Rally Troops as Alibaba’s Troubles Deepen

Alibaba’s plan to trim its XPeng stake shows that the internet giant is turning its focus onto its core businesses, according to Bao. “Unlocking the shareholder value and refocus on its essential business lines are really the priority for Alibaba,” he said.

XPeng reported a wider-than-expected third-quarter loss last month, and even with the record fourth-quarter deliveries it will ship fewer than 150,000 vehicles for the year — a fraction of rivals such as BYD Co.

Read more: Xpeng’s Gu Sees Margin Recovery After Bigger-Than-Expected Loss

XPeng, meanwhile, has attracted other investors. In July, Volkswagen said it will invest $700 million in the firm and jointly develop EVs in China. The German automaker will eventually hold a 4.99% stake in XPeng via a capital increase and is getting an observer board seat.

--With assistance from Lin Cheng and Lorretta Chen.

(Updates with Alibaba and XPeng comments in the third and fourth paragraphs.)