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Stellantis will invest €1.5bn to acquire about 20 per cent of Chinese electric vehicle start-up Leapmotor in a fresh attempt to crack China’s car market and capitalise on what it called a Chinese “offensive” in other regions.
Stellantis, which makes Jeep cars in the US and owns the Fiat and Citroën brands in Europe, will form a new joint venture to sell Leapmotor’s electric vehicles outside China.
The European carmaker will also take two seats on the board of the Hong Kong-listed company and appoint the new joint venture’s chief executive.
The investment marks a renewed bid by Stellantis to make inroads in China at a time of consolidation in the local market, after it unwound previous ventures in the country that proved disappointing.
Stellantis also planned to help bring Leapmotor’s models to other markets such as Europe within two years, chief executive Carlos Tavares said — opting to ride on the back of an influx of more competitively priced Chinese electric cars that western manufacturers are concerned about.
“Everywhere the Chinese offensive is there, whether we like it or not,” Tavares told reporters. “We don’t want to be the victims of the Chinese offensive on the world, we want to be leading the way and controlling it.”
Stellantis, which was formed by the merger of Italian-American group Fiat Chrysler and France’s PSA in 2021, has found it difficult to compete in China. In July last year it dissolved a joint venture with Guangzhou Automobile Group, which ran a factory building Jeeps in the country.
Leapmotor, founded in 2015, is among scores of Chinese electric vehicle companies hit by slowing economic growth and a price war. The group, which listed in Hong Kong last year and produces mid- to high-end cars in China, posted a net loss of Rmb5.1bn ($734mn) in 2022, with sales rising more than 150 per cent to upwards of 111,000 cars.
The company’s annual loss is forecast to narrow to about Rmb4.5bn this year. In comparison, net profit at Tesla’s Chinese rival BYD tripled in the first half of the year to Rmb10.95bn. The Warren Buffett-backed group, which is also pushing into Europe and other markets, reported monthly sales of nearly 250,000 electric and plug-in hybrid cars, about a third of all EV sales in China.
Citi analysts have been upbeat on Hangzhou-based Leapmotor, noting the executive team’s experience in artificial intelligence technology and strong research and development capabilities.
Leapmotor’s Hong Kong-listed shares fell as much as 13 per cent on Thursday before paring losses to trade down 10.9 per cent.
While overseas groups account for two-thirds of internal combustion engine car sales in China, four out of every five EVs now sold in the country are produced by Chinese companies, according to data from Automobility, a Shanghai-based consultancy.
Tu Le of Sino Auto Insights, an advisory company, said the investment in Leapmotor marked “quite a 180” for Tavares, who last year warned of growing Chinese government interference in western businesses operating in the country.
“This is an acknowledgment that the China market is too important to abandon and that Stellantis doesn’t have the capabilities themselves to be competitive,” he added.
Tavares was clear that Stellantis would “let Leapmotor drive the charge in China”, and said its previous ventures in the country had been “a lesson in humility”.
By bringing Leapmotor’s technology and models overseas, however, Stellantis is changing tack in an industry that has so far tried to compete with Chinese rivals producing cheaper cars.
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Just a month ago the EU announced an anti-subsidy probe into China’s EV industry in an attempt to shield European manufacturers before they are priced out.
Tavares said there was “posturing” in Europe but that ultimately the market remained open to Chinese competition, which he wanted to get ahead of. He argued that providing European consumers with more accessible electric vehicles would ultimately be beneficial, and that Stellantis could pursue some joint manufacturing at its European plants with Leapmotor if it needed to get around any trade measures.
“We need to be one step ahead of what the political leadership will do as our lead time is much longer,” Tavares added.
In July, Volkswagen said it would invest $700mn in Chinese rival Xpeng in a move designed to boost the German car manufacturer’s flagging sales in the country. Smaller Chinese groups, including Shanghai-based Aiways and WM Motor have been hit by funding crises in recent months.
