Stellantis, a prominent global automaker, unveiled its strategic move on Thursday by announcing its acquisition of a substantial 21% stake in electric vehicle (EV) manufacturer Leapmotor (HK:9863) in a momentous $1.6 billion deal. This venture not only marks a significant reentry for Stellantis into the competitive Chinese automotive market but also provides Leapmotor with an invaluable European foothold.
As the automotive industry undergoes a profound transformation towards electric mobility, established automakers like Stellantis are striving to keep pace with the shift. By establishing this partnership with Leapmotor, Stellantis, a company listed on the NYSE under the symbol STLA, gains direct access to Leapmotor’s cutting-edge EV technology.
This announcement comes amid a surge in Chinese EV manufacturers introducing cost-effective EV models to the European market, intensifying competition in the sector. Carlos Tavares, CEO of Stellantis, acknowledged this emerging trend, stating, “The Chinese offensive is visible everywhere. With this deal, we can benefit from it rather than being the victims of it.”
Stellantis, formed in early 2021 through the merger of France’s PSA and Fiat Chrysler (FCA), has encountered challenges in selling vehicles in China. The company, known for its brands such as Fiat and Peugeot, has pursued a revitalization of its presence in China, where it maintains a joint venture with Dongfeng Motor Group. In the past year, Stellantis made the decision to terminate its joint venture with Guangzhou Automobile Group, responsible for producing Jeeps in China.
This fresh alliance between Stellantis and Leapmotor is reminiscent of a previous collaboration between Volkswagen and Xpeng, which was announced in July. These partnerships signify a new era of automotive alliances in China, reflecting the country’s rise as a global epicenter for EV technology.
As part of the joint venture agreement, in which Stellantis will hold a 51% stake, the parent company of Chrysler will gain exclusive rights to export, sell, and manufacture products from Zhejiang Leapmotor Technology outside of Greater China.
While this move has garnered attention, some industry analysts remain skeptical about whether such minority-stake partnerships can genuinely revitalize established foreign auto brands in the highly competitive Chinese market. Tu Le, founder of Beijing-based advisory firm Sino Auto Insights, pointed out, “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, shared similar sentiments, stating that “successful automotive partnerships are few in number, and often dissolve when the interests diverge.”
Stellantis has expressed concerns about the growing presence of low-cost Chinese EVs in the European market. These concerns are echoed by the European Commission, which initiated an anti-subsidy probe aimed at determining whether tariffs should be implemented to safeguard European producers from Chinese imports.
Carlos Tavares, while previously a vocal critic of lower-cost Chinese imports into Europe, emphasized that the Leapmotor deal does not transform Stellantis into a “Trojan horse.” He also expressed reservations about the EU probe, noting, “We like competition. To start a probe is not the best way to tackle those questions.”
The market reacted to this development, with Leapmotor shares experiencing an 11% decline on Thursday, primarily due to concerns regarding heightened competition and the dilution of existing shareholdings. On the other hand, Stellantis shares saw a 1.3% decrease in early trading.
As more than 40 EV brands in China engage in a price war triggered by Tesla’s price reductions earlier in the year, sales have started to slow due to softening consumer demand. This has led to increased pressure on automakers and their suppliers to maintain their profit margins.
The joint venture, incorporated in the Netherlands, is expected to commence its export operations in the second half of 2024, with Stellantis securing two seats on the board of Leapmotor. This partnership will significantly bolster Stellantis’ electric vehicle portfolio, helping the company achieve its ambitious goal of having electric vehicles account for all of its European sales by 2030, as well as half of its sales in the United States.
Leapmotor, currently ranked ninth in terms of new energy vehicle sales in China, has been actively seeking partnerships with established foreign automakers to secure additional capital. The company stated that it needs at least a five-fold increase in sales to survive in a rapidly consolidating EV industry.
