Chinese electric vehicle (EV) manufacturer Xpeng Inc (NYSE:XPEV) has announced a major acquisition, striking a deal worth up to $744 million to purchase Didi’s electric car development business.

The deal aims to strengthen Xpeng’s position in the EV market and provide vehicles to the ride-hailing giant, Didi.

Following the news, Xpeng’s shares surged by 11% in Hong Kong trade and around 1.5% on the New York Stock Exchange in early US trading.

This acquisition comes on the heels of Xpeng’s recent partnership with Germany’s Volkswagen and a stake sale, demonstrating Xpeng’s commitment to expanding its presence in the competitive EV landscape.

Under the terms of the all-stock deal, Xpeng will introduce an A-class EV model next year under a new brand called “MONA.” This model will be priced at approximately 150,000 yuan ($20,000), which is notably lower than Xpeng’s current offerings, which are primarily priced above 200,000 yuan.

Didi’s decision to sell its EV development business to Xpeng indicates a shift in strategy, as initial speculation had Didi aiming to enter EV manufacturing. But slower demand and excess manufacturing capacity in China’s EV industry have increased competition, making it challenging for newcomers like Didi to enter the market.

Didi’s partnership with Xpeng is expected to leverage Xpeng’s technology and manufacturing capabilities, allowing for efficient production and potential sales to other businesses.

As part of the agreement, Didi will receive approximately 3.25% of Xpeng through the issuance of shares at HK$64.03 each, amounting to $474 million. If Xpeng meets its vehicle delivery targets, Didi’s stake could increase to 5.26%, with the total deal value reaching up to $744 million.

Additionally, both companies have indicated their intention to explore strategic cooperation in various areas, including potential collaborations in charging infrastructure, robotaxis, and international market expansion.

Didi has been actively working with Chinese automakers to develop robotaxi services, aiming for deployment by 2025.