- Stellantis to acquire 20% stake in EV maker Leapmotor
- Firms form JV to build and sell Leapmotor products outside China
- Deal gives Stellantis a crucial foothold in China
- Leapmotor shares jump, then tumble in Thursday trading
HANGZHOU, China, Oct 26 (Reuters) – Stellantis (STLAM.MI) is buying a 21% stake in Leapmotor Technology for $1.6 billion, it said on Thursday, in a reset of its China strategy to focus on EVs after years of poor sales and manufacturing pullback in the world’s biggest auto market.
The Chinese EV maker also announced the formation of a joint venture with Stellantis, in which the Chrysler parent will own a 51% stake giving it exclusive rights for the export and sale, as well as manufacturing, of Leapmotor (9863.HK) products outside Greater China.
The deal, that follows a Volkswagen-Xpeng (VOWG_p.DE), (9868.HK) tie-up announced in July, heralds a new era of automotive alliances in China and reflects how China is emerging as a new global centre of EV technology.
Speaking at a press conference in the eastern Chinese city of Hangzhou, Stellantis CEO Carlos Tavares praised Leapmotor as “tech-oriented company and its passion for “creating the best mobility options”.
“Leapmotor and (CEO) Zhu’s leadership bring a unique profile of good management of the financials of the company, a flexible mind and a strong willingness to grow around the world. This is a race on speed. We can help to enhance the speed,” he said, seated beside Leapmotor CEO Zhu Jiangming.
“Stellantis also needs exposure to the China market. We haven’t been so successful in China so we prefer to rely on a Chinese partner. To win in China is better to win with a Chinese company,” he said.
Stellantis, formed at the start of 2021 through the merger of France’s PSA with Fiat Chrysler (FCA), 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.
The group and rivals such as Renault (RENA.PA) have been concerned about growing competition from cheap Chinese electric cars in Europe, a worry is 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.
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.
Shares in Leapmotor jumped 11% upon the Hong Kong market opening but erased those gains to be down 5%. Its shares have climbed 78% in the past one year.
The Netherlands-incorporated joint venture is expected to start its export business in the second half of 2024 and its head will be appointed by Stellantis, Leapmotor said. Stellantis would also have two seats on its board of directors.
Zhu said they had been in contact with many automakers this year and found that their 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 and said it needed to increase its sales by at least five times to survive a consolidating EV industry.
Tavares said part of the attractiveness of Leapmotor was how the company was not suffering heavy losses by engaging in a bruising price war in China that has drawn in over 40 brands.
Leapmotor ranked ninth by new energy vehicle sales in China in September, according to data from the China Passenger Car Association.
The deal, which is subject to shareholder approval, will see Leapmotor issue 194.3 million Hong Kong shares to Stellantis for HK$43.8 per share, a premium of 19% to its last close of HK$36.80.
After the subscription, Stellantis will own about 21.07% of Zhejiang Leapmotor’s total issued Hong Kong shares. Shareholder Surveillance giant Dahua (002236.SZ), which was last year hit with export controls by the U.S., said it will sell off its 90 million Leapmotor shares to Stellantis as part of the deal.
($1 = 0.9466 euros)
Reporting by Zhang Yan and Brenda Goh; Additional reporting by Sameer Manekar and Kanjyik Ghosh in Bengaluru; Editing by Stephen Coates
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