June 18, 2024

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Stellantis has reset its China strategy with a $1.6 billion stake in electric vehicle company Leapmotor

Stellantis has reset its China strategy with a $1.6 billion stake in electric vehicle company Leapmotor

  • Stellantis acquires a 21% stake in electric car maker Leapmotor
  • The companies form a joint venture to build and sell Leapmotor products outside China
  • The deal gives Stellantis a crucial foothold in China
  • Leapmotor shares fell 10%, reversing initial 11% jump

HANGZHOU, China (Reuters) – Stellantis said on Thursday it had bought a 21% stake in Chinese electric car maker Leapmotor for $1.6 billion, recalibrating its strategy in China to focus on electric vehicles after years of weak sales and manufacturing. Decline in the world’s largest automobile market.

Leapmotor also announced the formation of a joint venture with Stellantis (STLAM.MI), in which Chrysler’s parent company will own a 51% stake giving it exclusive rights to export, sell and manufacture Zhejiang Leapmotor Technology (9863.HK) products outside the country. Greater China.

The deal, which follows a partnership between Volkswagen and Xpeng (VOWG_p.DE), (9868.HK) in July, heralds a new era of automotive alliances in China and reflects how the country is emerging as a global hub for electric vehicle technology. .

Carlos Tavares, CEO of Stellantis, said at a press conference in the eastern Chinese city of Hangzhou: “We have not achieved much success in China, so we prefer to rely on a Chinese partner. Winning in China is better than winning with a Chinese company.” Sitting next to Leapmotor CEO Zhu Jiangming.

Some analysts were skeptical that such a minority stake partnership would help established foreign car brands revive their flagging fortunes in China.

“Small investments that give them access to newer technology that they can’t develop internally don’t seem like the silver bullet they hope it will be,” said Tu Li, founder of a Beijing-based consulting firm. Sino Auto Insights Company.

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Bill Russo, CEO of Shanghai-based consultancy Automobility, agrees: “Successful automotive partnerships are few in number and often end when interests diverge.”

Stellantis, which was formed at the beginning of 2021 through the merger of France’s PSA with Fiat Chrysler (FCA), has struggled to sell cars in China and is looking to change its strategy in the country, where it has a joint venture with Dongfeng Motor Group (0489.Hong Kong).

The group, whose brands include Fiat and Peugeot, said a year ago that it would close its joint venture that makes Jeep vehicles in China with Guangzhou Automotive Group (601238.SS) after disappointing results.

Stellantis and rivals such as Renault are concerned about growing competition from cheap Chinese electric cars in Europe, a concern shared by the European Commission, which has launched an anti-subsidy investigation into whether tariffs will be imposed to protect European producers from China. Electric vehicle imports.

Tavares on Thursday criticized the EU investigation.

“We like to compete,” he said. “And starting an investigation is not the best way to address these issues.”

Asked how the Leapmotor partnership differs from its relationships with Dongfeng and GAC, Tavares said it would be better for a Chinese entity to lead the way in the Chinese market.

“If we develop Leapmotor overseas, it gives Leapmotor better competitiveness in the Chinese market,” he said.

Concerns about competition and dilution from existing shareholders sent Leapmotor shares down 11% on Thursday, reversing an 11% jump at market open.

More than 40 electric car brands are locked in a painful price war in China, sparked by Tesla’s price cuts earlier this year. Despite steep price cuts, electric vehicle sales are slowing due to weak consumer demand, squeezing profit margins for automakers and their suppliers.

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More partnerships

The joint venture established in the Netherlands is expected to start its export business in the second half of 2024, while Stellantis will have two seats on the Chinese company’s board of directors, the two companies said.

This partnership will help Stellantis expand its electric vehicle lineup and achieve the 2030 goal of electric vehicles accounting for all of its sales in Europe and half of its sales in the United States.

Leapmotor, which ranks ninth in terms of NEV sales in China, is looking to license EV platforms and other EV assets to established foreign automakers to generate cash. The company said last month that it needed to increase its sales by at least five times in order to survive in the merged electric vehicle industry.

“We will definitely see more and more of these partnerships, as Chinese EV startups have a real pressing need to survive and are open to acquiring foreign shareholders,” said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight.

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 19% premium to its last close of HK$36.80.

Following the IPO, Stellantis will own approximately 21.07% of Leapmotor’s total issued shares in Hong Kong. Shareholder Dahua (002236.SZ) said it would sell its 90 million shares in Leapmotor to Stellantis as part of the deal.

($1 = 0.9466 euros)

(Reporting by Zhang Yan and Brenda Goh – Reporting by Mohammed for the Arabic Bulletin) (Additional reporting by Samir Manekar and Kanjik Ghosh in Bengaluru – Preparing by Mohammed for the Arabic Bulletin) Editing by Myung Kim and Stephen Coates

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