Multinational automaker Stellantis is set to take a 20% stake in Chinese automaker Leapmotor, Bloomberg reports, citing people familiar with the matter.
The move is part of the company’s efforts to stay competitive in the rapidly growing EV market.
Report highlights
Stellantis reportedly agreed to a $1.1 billion deal with Leapmotor in exchange for a 20% stake in the local automotive brand.
According to an exchange filing released on Thursday, Stellantis will purchase approximately 194 million shares in Leapmotor at HK$43.80 per share. It indicates a 19% increase from the closing price on Wednesday.
As a result, Stellantis will own a 21.2% interest in the Chinese automaker and secure two seats on the board.
In addition, the two companies are also apparently planning to establish a new joint venture that will enable Stellantis to produce and market Leapmotor models beyond China, Reuters indicated.
Significance
Partnering with Leapmotor will substantially aid Stellantis in establishing a strong foothold in the Chinese EV market.
In retrospect, the multinational automaker ended the production of its sole Jeep factory in the Asian country. Last week, it disclosed that it would sell its auto assets to Dongfeng. These measures would totally end the company’s operations in China.
“Through this investment, we can address a white space in our business model. We feel it’s the perfect time to take a leading role in supporting the global expansion plans of Leapmotor, one of the most impressive new EV players who has a similar tech-first, entrepreneurial mindset to ours.”
Stellantis Chief Executive Officer Carlos Tavares
In return, Leapmotor can also tap into Stellantis’ multi-brand approach and technological advancements, AFP reports.
“As consolidation unfolds among the capable electric vehicles start-ups in China, it becomes increasingly apparent that a handful of efficient and agile new generation EV players, like Leapmotor, will come to dominate the mainstream segments in China. It’s the perfect time to take a leading role in supporting the global expansion plans of Leapmotor, one of the most impressive new EV players who has a similar tech-first, entrepreneurial mindset to ours.”
Stellantis Chief Executive Officer Carlos Tavares
Chinese automakers’ dominance
Stellantis’ decision to own a 20% stake in Leapmotor is unsurprising, considering the current challenges faced by non-Chinese brands in the world’s largest auto market.
In fact, German automaker Volkswagen has already partnered with XPeng with a $700 million stake in July.
Global automakers’ intensified efforts against Chinese brands significantly demonstrate the latter’s dominance in the global EV industry.
According to Barrons, Chinese NEV giant BYD successfully overthrew EV pioneer Tesla in the local market in the second quarter of the year.
“The partnership proves Chinese EV makers’ competitiveness in technology and supply chains. Working with European and American carmakers will provide a good credit and sales channel for Chinese companies, while Chinese EV stocks are expected to embrace a re-rating with the injection of capital.”
Wang Hanyang, Shanghai-based 86Research’s Auto Analyst
Chinese automakers continue to dominate the world’s largest automotive industry and have started to penetrate foreign markets through exports. Their strong market presence makes it harder for companies like Stellantis and Volkswagen to remain competitive in the EV industry. That said, their decision to partner with a Chinese company is indeed a remarkable move that may help them overcome the current pressures they face in China.
