Why Xpeng Stock is higher today

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What happened

Shares of Chinese electric vehicle maker Xpeng (NYSE: XPEV) were trading higher on Tuesday, after the company said it had secured a new $ 2 billion line of credit to help it grow its manufacturing and sales.

As of 1:45 p.m. EST, US custodian shares of Xpeng were up about 16.1% from Monday’s closing price.

So what

Xpeng said on Tuesday morning that it had secured a new 12.8 billion yuan (about $ 2 billion) line of credit from five Chinese banks. The company said it plans to use the line of credit to support “the expansion of its manufacturing, sales and service capabilities.”

Xpeng, which opened its first factory last June, opened a second factory in Guangzhou in November. The company started building its P7 sedan at this first plant last year; its first model, the G3 SUV, is being built under contract at a factory owned by established automaker Haima since 2019. Xpeng plans to add a third model, another sedan, by the end of 2021.

Xpeng is growing rapidly. The company opened its first factory last June and is already building a second. Image source: Xpeng.

In a statement, CEO He Xiaopeng said the deal helps diversify Xpeng’s funding channels. The company raised $ 1.7 billion during its IPO in August 2020 and an additional $ 2.5 billion during a secondary stock offering in December.

Now what

For auto investors, the move obviously strengthens Xpeng’s balance sheet in a way that doesn’t dilute existing shareholders or necessarily incur high costs. We’ll learn more about Xpeng’s plans for the new line of credit when it releases its fourth quarter and full year 2020 results next month.

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