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Electric cars in China

China's Xpeng gets $600m boost from city government

EV startup lays foundation for a second factory to accelerate production

Xpeng plans a second factory in Guangzhou that will significantly increase its production capacity.   © AP

HONG KONG -- Xpeng Motors has raised 4 billion yuan ($600 million) from the city government of Guangzhou and laid the foundations for the Chinese electric vehicle startup's second factory in three years.

The government investment underscores the growing ties between the emerging EV startups and the state as China looks to nurture home-grown champions that can challenge Tesla.

It comes a month after Xpeng Motor's $1.5 billion U.S. stock debut.

Guangzhou-based Xpeng, backed by e-commerce giant Alibaba, is one of the frontrunners among China's EV companies jockeying to take on Tesla, now the world's most valuable carmaker by market capitalization.

The Guangzhou government, which is already an investor in Xpeng through a fund it controlled, is more than happy to help fuel Xpeng's growth.

Under the agreement, announced on Monday, a fund wholly controlled by the Guangzhou Economic and Technological Development Zone will invest 4 billion yuan to fund the building of a factory for Xpeng there, as well as procurement of equipment and further investments in securities issued by Xpeng. The government will also help Xpeng secure financing at interest rates of no more than 4%.

"With the strong support from the Guangzhou government, we are confident we will execute on our strategic growth initiatives," said Xpeng's chairman and co-founder He Xiaopeng. 

The proposed Guangzhou plant is expected to start production in December 2022.

In June, Xpeng unveiled its first factory in Zhaoqing, Guangdong province, which cost 10 billion yuan to build. The Zhaoqing factory has annual production capacity of 100,000 units and is producing its newly released electric sedan model P7.

The Guangzhou factory will significantly boost Xpeng's production capacity, a problem that troubles most EV makers including Tesla.

The factory will be fully financed by the government fund, which commits to invest up to 1.3 billion yuan, according to Xpeng. The government will lease the finished plant to Xpeng for an initial period of seven years first and Xpeng will acquire the factory at cost when the lease expires.

Zhang Shuofu, party secretary of Guangzhou, was seen attending a ground-breaking ceremony on Monday.

Besides electric vehicles, the five-year-old EV startup is also exploring mobility solutions in the air. At the Beijing auto show, which is taking place this week, it debuted a self-developed flying vehicle model that can carry two people and fly at heights between 5 and 25 metres.

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