ARKANSAS, Oct 26 (Future Headlines)- Stellantis, the global automotive corporation, is acquiring a 21% stake in Chinese electric vehicle (EV) manufacturer Leapmotor Technology for $1.6 billion. This strategic move signifies a shift in Stellantis’ China strategy towards electric vehicles (EVs) after years of underwhelming sales and manufacturing retrenchment in the world’s largest auto market.

In addition to the stake purchase, Stellantis and Leapmotor are forming a joint venture. In this collaboration, Stellantis will hold a 51% stake, granting it exclusive rights for the export, sale, and manufacturing of Leapmotor products outside Greater China. This alliance highlights a new era of automotive partnerships in China and reflects China’s emerging status as a global hub for EV technology.

Speaking at a press conference in Hangzhou, China, Stellantis CEO Carlos Tavares praised Leapmotor as a “tech-oriented company” with a commitment to creating advanced mobility solutions. He emphasized the importance of speed in the evolving EV landscape and expressed Stellantis’ readiness to enhance this aspect of Leapmotor’s operations. Furthermore, Tavares acknowledged Stellantis’ previous struggles in the Chinese market and highlighted the value of collaborating with a Chinese partner. According to Tavares, winning in China is more feasible when partnering with a Chinese company that is deeply connected to the local market.

Stellantis, formed in 2021 through the merger of France’s PSA Group with Fiat Chrysler, has faced challenges in selling cars in China. As a result, the company has been reevaluating its strategy in China, including discontinuing joint ventures that yielded disappointing results. Notably, Stellantis closed its joint venture that produced Jeeps in China with Guangzhou Automobile Group in 2021. The group has also been dealing with competition from low-cost Chinese electric cars in Europe.

Tavares clarified that the Leapmotor partnership differs from Stellantis’ previous collaborations with Dongfeng and GAC. In this new alliance, Stellantis will play a more prominent role in developing Leapmotor’s overseas presence. By doing so, Stellantis aims to enhance Leapmotor’s competitiveness in the Chinese market.

Shares of Leapmotor surged by 11% when the Hong Kong market opened, although they later reversed these gains to be down by 5%. Despite this fluctuation, Leapmotor’s shares have appreciated by 78% over the past year.

A critical factor in the partnership with Leapmotor is the alignment of cultures between the companies. Stellantis and Leapmotor identified a shared vision and values, making the collaboration a strategic fit. The joint venture, incorporated in the Netherlands, is expected to commence its export operations in the second half of 2024. Stellantis will appoint the head of the venture and will hold two seats on its board of directors.

Leapmotor had previously announced its intention to license its EV platforms, battery and motor technology, and EV-ready chassis assemblies to established automakers outside China. The company also stressed the need to significantly increase its sales to remain competitive in the consolidating EV industry.

In the rankings for new energy vehicle (NEV) sales in China for September, Leapmotor stood at the ninth position, according to data from the China Passenger Car Association. The deal involves Leapmotor issuing 194.3 million Hong Kong shares to Stellantis at HK$43.8 per share, reflecting a 19% premium over Leapmotor’s last closing price of HK$36.80. Notably, surveillance giant Dahua, which had been subjected to export controls by the U.S. in the past year, announced its intention to sell its 90 million Leapmotor shares to Stellantis as part of this deal.

Stellantis’ investment in Leapmotor represents a significant step in reshaping its China strategy towards electric vehicles. The joint venture and export rights underscore the growing importance of the Chinese EV market as China increasingly emerges as a global center for EV technology. While Stellantis acknowledges past challenges in China, it sees potential in partnering with a local company like Leapmotor to bolster its position in the Chinese market. Leapmotor, in turn, benefits from Stellantis’ expertise and global reach. The cultural alignment between the companies and the strategic fit in their collaboration further reinforce their commitment to success in the EV industry.

Writing by Kevin Wood; Editing by Sarah White