Electric vehicle maker Xpeng Motors is working to secure a production license to deliver its first sedan in July with the recent acquisition of a domestic automaker.

Why it matters: Owning a factory allows Xpeng to retain control over quality and minimizes risks from outsourcing production such as delivery delays and price increases.

  • Beijing has essentially halted issuing EV production licenses since early 2019, when the National Development and Reform Commission released new rules aimed at cooling the country’s overheated new energy vehicle market.
  • The China’s top economic planner said its will not approve new manufacturing sites until existing makers have reached their production capacity in the respective provinces and municipalities. Struggling EV company Nio shelved plans to build its own plant in Shanghai, giving way to Tesla.

Details: Guangzhou-based EV maker Xpeng Motors has fully acquired Friday, a local commercial vehicle and auto parts manufacturer, according to information (in Chinese) released Thursday on business research platform Tianyancha.com.

  • Xpeng did not disclose the price it paid for Foday and must still file for final approval from regulators, which may take several months, before starting production in its newly built plant in Zhaoqing in southern Guangdong province.
  • The company late last year completed construction of the plant, which it kicked off in late 2017. It has annual production capacity of 100,000 units and required an initial investment of RMB 4 billion ($560 million). The plant is currently trial producing cars and has not started full operation.
  • The Xiaomi-backed EV startup in late 2017 outsourced production to Haima Automobile, a Hainan-based automaker and former Mazda partner. Haima posted a RMB 990 million loss from mismanagement in 2017, followed by RMB 1.64 billion in losses the next year.
  • Partnering with Haima, Xpeng began mass delivery of its first electric SUV, the G3, in early 2019. It handed over nearly 17,000 units over the past year, closely trailing Nio and WM Motor, and is about to deliver its first sports sedan, the P7, in July.
  • Xpeng and Haima have not disclosed the duration of their collaboration agreement, though it probably won’t end soon—Shenzhen-listed Haima told investors in February that it will produce the Xpeng P7, according to Caixin (in Chinese).

Context: Several young EV makers have obtained production licenses through investments in smaller, struggling automakers in order to operate their own manufacturing facilities.

  • Baidu-backed WM Motor bought Huanghai, a Dalian-based automaker in early 2017, and began operating its first production facility a year later. The Baidu-backed EV maker early this year announced completion of its second plant in Huanggang, a city in central Hubei province.
  • Would-be EV maker Byton invested in debt-laden Huali, a subsidiary of state-owned automaker FAW, for just RMB 1 in late 2018. The real cost was to cover its debt totaling RMB 850 million.
  • Nio is one of the few EV companies that has a contract manufacturer to produce its cars, having formed an agreement with Hefei-based JAC to form a joint venture in May 2016.
  • The cash-strapped EV maker is also pivoting to self-production with an investment plan of RMB 1.5 billion to set up its second production facility in Hefei, one of the conditions in a major financing project from the government.

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: jill.shen@technode.com or Twitter: @yushan_shen