LONDON (Reuters) - Chinese electric vehicle maker Aiways will go public via a merger with U.S. special purpose acquisition company Hudson Acquistion Corp in a deal that should value the company around $400 million, the two companies said.

The deal is a lifeline for Aiways, which halted production at its Shangrao plant last summer as a fierce EV price war in China squeezed automakers' margins. The company is among a group of struggling Chinese EV startups including WM Motors and Human Horizons that have suspended operations amid sluggish sales.

The SPAC merger should close by the end of the year, the companies said.

Prior to its current financial struggles, Aiways had been selling its U5 and U6 electric models in 16 European markets, meaning it has existing products and operations where it is ready to go, though scaling up production is expensive.

The plant in Shangrao has the capacity to build 300,000 EVs annually.

Aiways had been in talks with investors for months on restarting production of its existing models and developing a new, affordable car as an export-only brand focused on Europe in the short term.

"The new entity will be strategically positioned to capitalize on our vision and resources in the European EV market," Alexander Klose, managing director of Aiways Europe said in a statement issued late on Tuesday evening.

Aiways will be headquartered in Europe to handle sales, marketing, finance, while manufacturing, procurement and research and development will mostly be handled in China, according to a source familiar with the automaker's plans who was not permitted to discuss them publicly.

The announcement comes just days after Chinese EV maker Zeekr, a unit of, saw its shares rise almost 35% above their initial public offering price in a strong start for the first major U.S. market debut by a China-based company since 2021.

Founded in 2017, Aiways' investors include tech giant Tencent, ride-hailing group DiDi and battery maker CATL, which will remain shareholders, according to a source familiar with the matter.

(Reporting By Nick Carey; Editing by Emelia Sithole-Matarise)