Chinese electric car maker Xpeng Motors has acquired an established local auto manufacturer, in a move that could take it one step closer to being able to independently produce its own vehicles.

The Guangzhou-based carmaker confirmed on Monday that it had fully acquired Foshan-based Guangdong Foday Auto Company.

Xpeng has been constructing a new factory in Zhaoqing where it is expected to launch and assemble its upcoming model P7. (Picture: Handout)

“The transaction is a critical step of our long term strategic plan,” an Xpeng spokeswoman said. “It will further strengthen Xpeng’s supply chain management, product development and manufacturing capabilities.”

Backed by Post parent company Alibaba Group Holding, IDG Capital and Xiaomi among other investors, the five-year-old company is one of China’s most prominent electric vehicle start-ups and has been hailed as a challenger to market leader Tesla.

Local media reported that through the buyout, Xpeng would obtain Guangdong Foday’s vehicle manufacturing licence, allowing it to produce its own vehicles.

Last year, Beijing tightened its rules on the production of electric vehicles, making it more difficult for small players to obtain the permits.

Currently, Xpeng manufactures its vehicles through contractor Haima Automobile Group. Its 10,000th electric vehicle built by Haima rolled offline in June at its manufacturing facilities in Zhengzhou, Henan province.

Xpeng’s arrangement with Haima and its manufacturing facilities in Zhengzhou will remain unchanged, the spokeswoman said, adding that the company would not comment further as it is in the process of gaining relevant government approvals and completing procedures.

In contrast to fellow Chinese competitor NIO, which shelved its plans to build its own car plant in Shanghai last year, Xpeng has been constructing a new factory in Zhaoqing, Guangdong province, where it is expected to launch and assemble its upcoming model P7.

Xpeng has a “healthy operating status” and the transaction will not impose any major pressure on its financing capabilities, according to the spokeswoman.

Guangdong Foday, established in 2001, is regarded as one of coastal Guangdong province’s most established automobile companies, according to Chinese auto news portal Gasgoo. Aside from full vehicles like pickups and sport utility vehicles, it also manufactures vehicle bodies and auto parts.

The investment comes after Xpeng secured permits from US transport authorities to test drive its new P7 model on American roads, revving up its preparations for head-on competition with Tesla in the latter’s home market.

The P7 electric sports sedan is Xpeng’s second production model and has a driving range of about 706km in a single charge, the longest among electric vehicles sold in China.

The P7 retails at between 240,000 yuan (US$34,240) and 370,000 yuan, nearly a third of the price of a Tesla Model S in China. Xpeng earlier said it had more than 15,000 pre-orders as of November and will start delivery in the second quarter of this year.

(Abacus is a unit of the South China Morning Post.)