Electric car: Stellantis joins forces with Chinese Leapmotor and becomes its arm outside China

Correspondent in Asia

Carlos Tavares shows off his claws in China. After giving up industrial activity in the world's largest automobile market, the CEO of the American-Franco-Italian giant Stellantis announced Thursday in Hangzhou a partnership with the Chinese electric vehicle manufacturer Leapmotor, with Europe in his sights. Stellantis announced an investment of 1.5 billion euros in Leapmotor, taking a 21.3% stake in this start-up specializing in electric vehicles with the aim of supporting its international offensive.

By becoming a key shareholder of the Chinese start-up, “we are providing an innovative response to complete our strategy, benefiting from Leapmotor's competitiveness both in China and internationally” declared Tavares after a ceremony signing ceremony in the People's Hall in Zhejiang province, near Shanghai.

The agreement includes the creation of a joint venture dedicated to exports, called Leapmotor International, where Stellantis will have a majority stake, with 51% of the shares, and which will hold “the exclusive rights to manufacture, export and sell Leapmotor products outside from China". The American-French-Italian group will have the “leading role” in this new entity which will attack Europe from the second half of 2024.

Also readCarlos Tavares: “With the electric car, Europe has rolled out the red carpet for Chinese manufacturers”

With 10,000 vehicles sold each month in the Middle Kingdom, Leapmotor is one of the myriad of new Chinese manufacturers purely dedicated to electric vehicles (EV), which are already knocking on the door of the European market, and in particular France, where it sold 200 vehicles. “Today is a major milestone in Leapmotor history. We believe in win-win partnerships with strong players,” declared Zhu Jiangming, CEO of the company founded in 2015, using a formula dear to the diplomacy of the second world power. The entrepreneur is also the founder of Zhejiang Dahua, a surveillance camera company targeted by American sanctions, in a tense geopolitical context between Beijing and Washington. Listed on the Hong Kong Stock Exchange, Leapmotor has risen to fourth place among manufacturers purely dedicated to electric vehicles in terms of sales. “Leapmotor is close to the podium,” underlines Carlos Tavares, whose competitive spirit is well known.

Western car manufacturers are increasing their partnerships with young Chinese electric companies to conquer the local market, but this agreement is the first aimed at international expansion, says Stellantis. Volkswagen announced in July a partnership and a 4.99% stake in Xpeng, a manufacturer based in Canton, which also covets the old continent.

This announcement marks a turning point in the Chinese strategy of Carlos Tavares, who has long warned of the threat posed by the manufacturers of the Asian giant. Stellantis has reduced the presence of Peugeot and Citroën in conventional combustion cars. They have just sold three factories in Wuhan, Chengdu and Xiangyang to their historic partner Dongfeng this month, to concentrate their efforts on electric “pure players”.

Noting the vulnerability of the EU market to Chinese competition, despite multiple calls for protective measures, Tavares prefers to ride the wave rather than be overwhelmed. “The Chinese offensive on Europe is already a reality. We do not want to be a spectator but an actor and leader of this offensive to benefit from it,” explained the boss of the American-Franco-Italian group, during an online exchange with journalists. With the main advantage being price, at a time when European industry is struggling to produce an affordable vehicle for households. “The reality is that Europe desperately needs it. With Leapmotor we will be very cost efficient. The product is already ready,” explains the Portuguese manager. The start-up present at the Munich show last September notably offers a compact model, the T03, at 26,000 euros in France to meet the demand of the entry-level market. But the next cars designed for export with Stellantis will not arrive for two years, the companies specify.

Asked about the possibility of producing Leapmotor cars in its own factories, the Stellantis boss remained vague. “It will depend on what Leapmotor asks us. If carbon taxes or customs duties create barriers, we will have the opportunity to help. We have factories all over the world in Europe, North America, Africa..."

While the European Commission has opened an investigation into the subsidies offered by Beijing to its manufacturers, Tavares is assuming his strategic shift with pragmatism. “Europe has made the political decision to keep its market open. This is not Stellantis' responsibility. The Chinese offensive has already started, and we do not want to be a victim, but a leader,” the former Renault manager justifies.