Chinese electric car start-up Xpeng Motors is building a new plant in the southern city of Guangzhou with investment from the local government, as the Tesla challenger flush with capital after its recent New York listing eyes expansion in the mainland.
The carmaker will receive 4 billion yuan (US$587 million) in financing from the Guangzhou Economic and Technological Development Zone for the factory as well as its future growth, the company said in a statement on Monday.
The Guangzhou government entity’s share of investment in the new plant, which is expected to start production by December 2022, is 1.3 billion yuan.
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This will significantly expand the company’s production capacity, currently at 100,000 units per year driven by its plant in Zhaoqing city in Guangdong province, according to the statement.
“With the strong support from the Guangzhou government, we are confident we will execute on our strategic growth initiatives and deliver the highest quality products and services to meet our customers’ needs,” said He Xiaopeng, chairman and chief executive of Xpeng.
The move is a significant boost to Xpeng, which raised US$1.7 billion from its initial public offering on the New York Stock Exchange in August. Thanks in part to a mouthwatering surge in Tesla’s share price this year, China’s electric vehicle start-ups have gained more traction in raising funds and expanding production over the past few months.
Under the partnership with Xpeng, the Guangzhou Economic and Technological Development Zone will first lease the factory to Xpeng upon its completion and then sell it to the carmaker when the lease expires in seven years.
In addition to providing help for construction of the factory, the Guangzhou government has also agreed to facilitate 1.2 billion yuan in financing to Xpeng in the form of fixed-return investment or long-term bank loans with annual returns of 4 per cent, the statement said.
The government will also invest another 1 billion in Xpeng by March 2021, and potentially purchase 500 million yuan worth of a stake in the company by August 2022.
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