On Thursday, Stellantis announced its acquisition of a 21% stake in electric vehicle (EV) manufacturer Leapmotor (HK:9863) in a substantial $1.6 billion deal. This strategic move is aimed at rejuvenating Stellantis’ presence in the Chinese market, while simultaneously providing Leapmotor, a smaller Chinese automaker, with a stepping stone into the European market.
Amid the global shift towards electric vehicles, established international automakers are working tirelessly to catch up. This agreement not only grants Stellantis (NYSE:STLA) access to Leapmotor’s advanced EV technology but also enables the company to compete effectively in the burgeoning Chinese EV market.
“The Chinese offensive is visible everywhere,” noted Stellantis CEO Carlos Tavares during a press conference. “With this deal, we can benefit from it rather than being the victims of it.”
Stellantis, formed in 2021 through the merger of France’s PSA with Fiat Chrysler (FCA), has faced challenges in selling cars in China and has been seeking a fresh start in the country. This comes as the company maintains a joint venture with Dongfeng Motor Group. Just last year, the group made the decision to terminate its joint venture with Guangzhou Automobile Group, responsible for Jeep production in China.
This new partnership follows the alliance between Volkswagen (ETR:VOWG_p) and Xpeng (NYSE:XPEV) announced in July, signifying a new era of automotive collaborations in China. It also underscores China’s emergence as a global hub for EV technology.
In a joint venture in which Stellantis holds a 51% stake, the company will exclusively possess the rights to export, sell, and manufacture Zhejiang Leapmotor Technology’s products outside Greater China.
However, some analysts have expressed skepticism about whether such minority-stake partnerships will help established foreign auto brands revive their declining fortunes in China. Tu Le, founder of Beijing-based advisory firm Sino Auto Insights, noted that “small investments that allow them access to newer technology that they’re not able to develop in-house doesn’t seem like… the silver bullet they’re hoping it is.” Bill Russo, CEO of Shanghai-based advisory firm Automobility, agreed, stating that “successful automotive partnerships are few in number and often dissolve when the interests diverge.”
Stellantis has been wary of increasing competition from affordable Chinese EVs in Europe, a concern shared by the European Commission, which initiated an anti-subsidy probe to consider imposing tariffs to protect European producers from Chinese imports.
Tavares, who has previously criticized lower-cost Chinese imports into Europe, emphasized that the Leapmotor deal does not make Stellantis a “Trojan horse” and voiced his concerns regarding the EU probe. “We like competition. To start a probe is not the best way to tackle those questions,” he stated.
Leapmotor’s shares experienced an 11% decline on Thursday, primarily due to worries about competition and the dilution of existing shareholdings, while Stellantis saw a 1.3% drop in its early trading shares.
The newly-formed Netherlands-incorporated joint venture is anticipated to launch its export operations in the second half of 2024, with Stellantis securing two seats on the Chinese firm’s board. This collaboration will enable Stellantis to expand its EV portfolio and work towards its 2030 goal of having EVs constitute all of its sales in Europe and half in the U.S.
Leapmotor, which ranks ninth in new energy vehicle sales in China, has been actively seeking to license its EV platforms and other assets to established foreign automakers to generate capital. The company declared last month that it needed a substantial increase in sales to survive in a consolidating EV industry.
“We will certainly see more and more such partnerships as Chinese EV startups have a real urgency to survive, and they are open to having foreign shareholders,” said Yale Zhang, managing director at Shanghai-based consultancy Automotive Foresight.
Under the terms of the deal, subject to regulatory approval, Leapmotor will issue 194.3 million shares to Stellantis at HK$43.8 per share, representing a 19% premium over its last closing price, thereby granting Stellantis a 21.07% stake in the total Hong Kong-listed shares.
($1 = 0.9466 euros)
