Xpeng Inc. shares soared after it agreed to buy Didi Global Inc.’s smart car division in a deal that both eliminates a potential rival in the crowded electric vehicle market and gives it a tech-savvy partner in the new venture.

Didi will take a 3.25 percent stake in Xpeng in an all-stock deal valued at HK$5.84 billion (US$744 million), according to stock exchange documents filed Monday. Xpeng shares rose more than 16% in Hong Kong trading but then trimmed gains to close 11% higher. The company’s American depositary receipts were up 5% by 4:27 a.m. in New York.

As part of the deal, Xpeng plans to launch a new brand of electric cars in partnership with Didi in 2024. The cars, dubbed “MONA,” will target the mass market segment and will cost around 150,000 yuan, or about $20,000. The partnership comes just over a month after Xpeng received a $700 million investment from German auto giant Volkswagen AG to jointly develop electric vehicles for the Chinese market, and should allay investors’ fears of low sales amid increasing competition from Nio Inc, BYD Co. and Tesla Inc.

Xpeng, which has invested heavily in autonomous driving, said it will explore cooperation with Didi in fleet management, marketing, insurance, charging stations, robotaxis and international markets.