True EV Distribution Pty Ltd v Shenzhen Xiaopeng Motors Supply Chain Management Co Ltd

In True EV Distribution Pty Ltd v Shenzhen Xiaopeng Motors Supply Chain Management Co Ltd [2026] FCA 380, the Federal Court considered an urgent attempt to stop XPeng from appointing an additional Australian distributor. True EV said it had an exclusive distribution arrangement and argued that XPeng's notice removing exclusivity was invalid under the contract and also raised issues under the Franchising Code and the Australian Consumer Law.

The court refused the interlocutory injunction. Importantly, that was not because the judge finally rejected all of True EV's legal arguments. The judge was prepared to proceed on the basis that there was a serious question to be tried on some issues. The application failed because the balance of convenience did not favour preserving exclusivity until trial.

The main practical reasons were True EV's financial position, the lack of satisfactory security for its undertaking as to damages, the evidence of substantial detriment to XPeng if restrained, and the court's view that damages could likely be assessed later if True EV ultimately succeeded.

The commercial relationship was built around a distributor agreement dated 14 May 2024. Under the court's summary of that agreement, True EV was appointed as the exclusive distributor in Australia of XPeng vehicles and related goods for at least five years, with a prospect of further extension.

The dispute escalated on 1 January 2026, when XPeng gave True EV a notice under article 2.3 of the agreement terminating True EV's exclusivity and stating that XPeng Motors Australia Pty Limited would also distribute XPeng vehicles in Australia. The notice did not terminate True EV's right to distribute XPeng vehicles altogether. Instead, it removed exclusivity.

That distinction mattered. The case was not about a complete termination of the distributorship. It was about whether XPeng could add another distributor and thereby change True EV from exclusive distributor to one distributor among more than one.

True EV moved urgently because the court accepted that, unless restrained, XPeng would probably appoint the third respondent and it would start acting as another authorised distributor in Australia from 1 April 2026. True EV wanted orders restraining XPeng from appointing any additional distributor and restraining the respondents from distributing vehicles, goods or services in Australia other than through True EV or in accordance with the contract.

In practical terms, True EV wanted the court to preserve the existing market position until final judgment. XPeng, by contrast, wanted to proceed with a dual-distribution model through its Australian subsidiary.

The evidence before the court showed a strained and commercially troubled relationship. The judge referred to annual order targets in Annexure 3 and to payment terms requiring part payment shortly after the sales contract and the balance by letter of credit or equivalent financial instrument before shipment. On the material before the court, True EV had ordered and paid for less than a third of the obligatory order targets in 2024 and 2025 if XPeng's construction of the agreement was correct.

The court also noted that in most shipments True EV had successfully sought to renegotiate payment terms, and that the material strongly suggested an inability, rather than mere unwillingness, to comply with the agreed payment regime. There had been only one further contract for vehicles after 7 March 2025, and True EV had not provided payment as required. The court also noted that Helios, a trade finance provider, had appointed receivers over relevant assets comprising about 197 vehicles.

XPeng had issued breach notices in April 2025, including one concerning annual order targets and other matters, and another concerning sales through unauthorised dealers. XPeng argued that its brand launch and entry into the Australian electric vehicle market had become dysfunctional. The judge said the brand's entry into the Australian market appeared to be in a state of considerable dysfunction and that there was no cogent basis to indicate that this would change if True EV remained the exclusive distributor.

That commercial background shaped the urgent application. The court was not deciding the final rights of the parties in a vacuum. It was deciding whether to freeze a deteriorating commercial arrangement while the substantive claims were litigated.

The application was for an interlocutory injunction. That required the court to consider two separate questions.

First, was there a serious question to be tried? This is not a final merits determination. It asks whether the applicant has shown an arguable case that is sufficiently serious to justify the court considering temporary relief.

Secondly, did the balance of convenience favour granting the injunction? This is the practical question. It looks at the likely harm to each side, whether damages later would be adequate, whether the applicant can support its undertaking as to damages, and whether the court should preserve the status quo until trial.

True EV advanced several arguments. It said the notice was invalid because article 2.3 of the distributor agreement had not been complied with. Article 2.3 allowed XPeng to terminate exclusivity or appoint an additional authorised distributor in certain circumstances, including where, in XPeng's view acting reasonably, the functioning of the sales and service network made it necessary to appoint an additional distributor within the territory.

True EV also alleged contraventions of section 51ACB of the Competition and Consumer Act 2010 (Cth) through alleged breaches of clauses 46A and 46B of the Franchising Code of Conduct. As summarised by the court, the argument was that removing exclusivity would amount to a material change to True EV's rights under or in relation to the agreement, with consequences under the Code concerning changed distribution models and compensation. True EV also argued that without exclusivity it would not have a reasonable opportunity to make a return on its investment during the term of the agreement.

True EV further alleged unconscionable conduct under section 21 of the Australian Consumer Law. The judge did not need to decide whether there was a serious question to be tried on good faith and unconscionability because of the way the application was resolved.

Justice Jackman refused the interlocutory injunction. On the first limb, the judge did not finally resolve the merits. Instead, the judge was prepared to proceed on the basis that there was a serious question to be tried on aspects of the Franchising Code case, including whether the loss of exclusivity involved a material change to True EV's rights and whether there was a serious question on the reasonable opportunity to make a return on investment. The judge also proceeded on the basis that there was a serious question to be tried as to whether XPeng's reasons under article 2.3 were reasonable.

However, the judge was not persuaded that there was a serious question to be tried about whether XPeng had actually formed the contractual state of mind required by article 2.3. Although the original notice was not expressed in the exact contractual language, XPeng's solicitors later wrote to True EV on 7 January 2026 stating that XPeng had formed the required view and giving substantive reasons. On that point, the court did not think there was a serious question to be tried.

The decisive issue was the balance of convenience. The court accepted that True EV faced realistic detriment if exclusivity ended. The evidence indicated that True EV had already lost two significant investment opportunities, had to abandon discussions and negotiations with potential dealers, had suffered reputational harm with its existing dealer network, and had lost credibility as an importer, distributor and franchisor. The judge also accepted there was some chance that True EV could improve its business performance and recoup its substantial investment, and that continuation of exclusivity might enhance that chance.

But the court also found real and tangible detriment to XPeng if the injunction were granted. The affidavit evidence from the chief operating officer of XPeng Motors Australia provided a cogent basis for an estimated loss of about $14.5 million if the third respondent was prevented from commencing operations on 1 April 2026, assuming a six month period to judgment after final hearing. The court accepted that assumption as sound given the hearing timetable.

A central problem for True EV was the undertaking as to damages. The court found that, in light of True EV's financial position, it did not appear to have the wherewithal to honour an undertaking in that amount and had not been able to provide satisfactory security. True EV had offered charges over assets, but there was no evidence of the value of those assets. It had also offered directors' guarantees, but there was no evidence of the directors' net assets.

The court also considered that assessing damages later would not be unduly difficult if True EV succeeded at final hearing. Sales made by the third respondent from 1 April 2026 would provide a useful starting point for analysing how many additional sales True EV would likely have made if it had remained the exclusive distributor. The judge accepted that experts could deal with competing arguments about whether those sales were a reliable proxy for loss.

The judge identified two further practical factors. First, there was a real likelihood of ongoing disputation between the parties before final hearing, which would require significant supervision by the court and consume executive time and energy. Secondly, the judge noted an oddity in the case: no final injunction had been sought in the originating application. True EV said it proposed to amend its application to claim a final injunction only if it obtained an interlocutory injunction. The court treated that feature as casting real doubt on whether it was appropriate to grant interim relief.

For those reasons, the court held that the balance of convenience did not favour the grant of the interlocutory injunction, principally because of the insufficiency of the undertaking as to damages and the conclusion that assessment of damages would not be unduly difficult.

This case is especially relevant to businesses that rely on exclusivity clauses, dealer networks, master distribution rights or franchise-style market entry arrangements. The first practical point is that exclusivity disputes are not decided only by reading the contract. Courts also look closely at the commercial history between the parties, including order performance, payment compliance, operational capability and the practical consequences of preserving or changing the existing arrangement before trial.

If your business has missed targets, struggled to meet agreed payment terms, needed repeated concessions, or is facing financial distress, those facts may become central if you later ask a court for urgent relief. Even if you can point to an arguable contractual or statutory breach, the court may still refuse to freeze the position if your own commercial performance is weak and the other side can show substantial harm from being restrained.

The second point is about the undertaking as to damages. Businesses sometimes focus heavily on proving the other side is wrong and not enough on proving they can stand behind the undertaking required for interim relief. This case shows that the court will test that issue seriously. If the likely exposure is large, you may need persuasive evidence of asset value, liquidity, security or guarantor capacity. Unsupported offers of charges or guarantees may not be enough.

The third point is about damages as an alternative remedy. If a court thinks later compensation can be assessed with reasonable confidence, that can weigh heavily against an injunction. Here, the judge considered that actual sales by the additional distributor could provide a useful basis for expert analysis of True EV's loss. Businesses should therefore think early about whether their alleged loss is truly hard to quantify or whether later market data may make a damages case workable.

The fourth point is procedural. If you may need urgent court protection, your originating application should clearly seek the final relief that matches the interim order. The court was troubled by the fact that no final injunction had been sought and that True EV only proposed to amend if it first won interim relief. That is a practical pleading lesson for any business contemplating urgent proceedings.

Finally, this decision should not be read as a final endorsement of XPeng's position. It is a pre-trial ruling on temporary relief. The court's serious-question findings were provisional, and the refusal of the injunction turned mainly on practical and evidentiary considerations rather than a final merits determination.

The judgment was delivered on 30 March 2026 by Jackman J in the Federal Court of Australia. The application for an interlocutory injunction was dismissed, the applicants were ordered to pay the respondents' costs of that application on a lump sum basis, and the matter was listed for further case management and any application for security for costs.

The proceedings were fixed for hearing for three weeks commencing 6 October 2026. Because this page deals with an interlocutory ruling, it should be read as guidance on interim relief and litigation risk rather than as the final outcome of the substantive dispute.