Stellantis takes stake in EV maker Leapmotor; Europe JV planned

HANGZHOU, China -- Stellantis said it is buying a 21 percent stake in EV maker Leapmotor in a $1.6 billion deal that will give it a fresh shot in China and the smaller Chinese automaker a European foothold.

Stellantis and Leapmotor will set up a Dutch-based joint venture, in which Stellantis will own a 51 percent stake giving it exclusive rights for the export, sale and manufacturing of Leapmotor's products outside China.

The deal, which follows a Volkswagen-Xpeng tie-up announced in July, heralds a new era of automotive alliances in China and reflects how the country is emerging as a global center of EV technology.

"The Chinese offensive is visible everywhere," Stellantis CEO Carlos Tavares told a news conference on Thursday in the eastern Chinese city of Hangzhou. "With this deal we can benefit from it rather than being the victims of it."

The Netherlands-incorporated JV is expected to start its export business in the second half of 2024. Its head will be appointed by Stellantis, which will also have two seats on the JV's board of directors.

The partnership will help Stellantis expand its EV lineups and meet a 2030 target of EVs accounting for all of its sales in Europe and half of its U.S. sales.

Leapmotor CEO Zhu Jiangming said the company's management had been in contact with many automakers this year and found its culture was aligned with Stellantis.

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, adding it needed at least a fivefold increase in sales to survive in a consolidating EV industry.

Stellantis 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 Motor Group. Stellantis said last week it plans to sell automotive assets to Dongfeng.

Stellantis is also closing its other China joint venture that makes Jeeps in China with Guangzhou Automobile Group after disappointing results.

Not a 'Trojan horse'

Stellantis and European automakers have been concerned about growing competition from cheap Chinese electric cars in Europe, a worry 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.

Tavares has in the past been a vocal critic of lower-cost Chinese imports into Europe, but told reporters the Leapmotor deal did not make Stellantis a "Trojan horse" and was critical of the EU probe.

"As we have global issues to face, we have to adopt a global mentality. We do not support a fragmented world. We like competition. To start a probe is not the best way to tackle those questions," he said.

Asked about how the Leapmotor partnership was different from its tie-ups with Dongfeng and GAC, Tavares said it was better for a Chinese entity to lead the way in the Chinese market.

"In the previous partnerships, Stellantis was not the promoter of the development of the Chinese brands overseas. If we develop Leapmotor overseas, it gives Leapmotor better competitiveness in the Chinese market," he said.

Concerns about intense competition in China and dilution effect sent shares in Leapmotor down 10 percent on Thursday, reversing an 11 percent jump upon the market opening.

More than 40 EV brands are locked in a bruising price war in China, triggered by Tesla's price cuts earlier this year. Despite steep price reductions, EV sales are slowing due to weak consumer demand, putting margin pressure on automakers and their suppliers.

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

Some analysts were skeptical that such minority-stake partnerships would help established foreign auto brands revive their declining fortunes in China.

"Small investments that allow them access to newer technology that they are not able to develop in-house doesn't seem like ... the silver bullet they are hoping it is," said Tu Le, founder of Beijing-based advisory firm Sino Auto Insights.

Bill Russo, CEO of Shanghai-based advisory firm Automobility, agreed that "successful automotive partnerships are few in number, and often dissolve when the interests diverge."

The deal, which is subject to regulatory approvals, will see Leapmotor issue 194.3 million Hong Kong-listed shares to Stellantis for HK$43.8 per share, a premium of 19 percent to its last close of HK$36.80.

After the subscription, Stellantis will own about 21.07 percent of Leapmotor's total issued Hong Kong shares. Shareholder Dahua, a surveillance giant that was last year hit with export controls by the U.S., said it would sell its 90 million Leapmotor shares to Stellantis as part of the deal.