Stellantis gains foothold in China with $1.6 billion stake in EV maker Leapmotor

Stellantis NV on Thursday announced a 1.5 billion euro ($1.6 billion) deal to acquire a 20 per cent stake in China's Leapmotor Technology in a move that gives the European automaker a vital foothold in the world's largest auto market. The Chinese EV maker also announced the formation of a joint venture with Stellantis, in which the Chrysler parent will own a 51 per cent stake giving it exclusive rights for the export and sale, as well as manufacturing, of Leapmotor products outside Greater China.

The Netherlands-incorporated joint venture is expected to start its export business in the second half of 2024 and its head will be appointed by Stellantis, Leapmotor said. Stellantis would also have two seats on its board of directors. "Through this strategic investment, we can address a white space in our business model and benefit from Leapmotor's competitiveness both in China and abroad," Stellantis CEO Carlos Tavares said.

Stellantis, formed at the start of 2021 through the merger of France's PSA with Fiat Chrysler (FCA), has struggled to sell cars in China and has been looking to reshuffle its strategy in the country where it has a joint venture with Dongfeng.

The group, whose brands include Fiat and Peugeot, said a year ago it was closing its joint venture that makes Jeeps in China with Guangzhou Automobile Group amid disappointing results.

The group and rivals such as Renault have been concerned about growing competition from cheap Chinese electric cars in Europe, a worry is shared by the European Commission which has launched an anti-subsidy probe into whether to set tariffs to shield European producers from Chinese EV imports.

Leapmotor said last month it was looking to license its EV platforms, battery and motor technology or EV-ready chassis assemblies to established automakers outside China and said it needed to increase its sales by at least five times to survive a consolidating EV industry.

The company ranked ninth by new energy vehicle sales in China in September, according to data from the China Passenger Car Association.

The deal, which is subject to shareholder approval, will see Leapmotor issue 194.3 million Hong Kong shares to Stellantis for HK$43.8 per share, a premium of 19 per cent to its last close of HK$36.80. After the subscription, Stellantis will own about 21.07 per cent of Zhejiang Leapmotor's total issued Hong Kong shares. Shareholder Surveillance giant Dahua, which was last year hit with export controls by the U.S., said it will sell off its 90 million Leapmotor shares to Stellantis as part of the deal.

Other European makers have also forged new alliances with Chinese EV manufacturers as the global centre of EV technology shifts to China. In July, Germany's Volkswagen said it would invest $700 million in Xpeng and purchase a 4.99 per cent stake in the company. The two firms will produce two models targeting the middle-class segment which will carry the VW logo but feature Xpeng know-how on software and autonomous driving.