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Stellantis will invest €1.5bn to acquire about 20 per cent of Chinese electric vehicle start-up Leapmotor in a sign of deepening industry consolidation in China’s car market.
Stellantis, which makes Jeep cars in the US and owns the Fiat and Citroën brands in Europe, will form a new joint venture to sell Leapmotor’s electric vehicles outside China.
The European carmaker will also take two seats on the board of the Hong Kong-listed company and appoint the new joint venture’s chief executive, Stellantis said in a statement.
“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,” said Stellantis chief executive Carlos Tavares.
Leapmotor, founded in 2015, is among scores of Chinese electric vehicle companies hit by slowing economic growth and a fierce price war. The group, which listed in Hong Kong last year and produces mid- to high-end cars in China, posted a net loss of Rmb5.1bn ($734mn) in 2022, with sales rising over 150 per cent to more than 111,000 cars.
The company’s annual loss is forecast to narrow to about Rmb4.5bn this year as monthly sales increase to about 18,000 cars through the fourth quarter. In comparison, net profit at Tesla’s Chinese rival BYD tripled in the first half of the year to Rmb10.95bn. The Warren Buffett-backed group reported monthly sales of nearly 250,000 electric and plug-in hybrid cars, about a third of all EV sales in China.
Citi analysts have been upbeat on Hangzhou-based Leapmotor, noting the executive team’s experience in artificial intelligence technology and strong research and development capabilities.
Leapmotor’s Hong Kong-listed shares fell as much as 13 per cent on Thursday before paring losses to trade down 9.4 per cent.
The tie-up with Stellantis comes as foreign brands struggle to compete in China’s EV market.
While overseas groups account for two-thirds of internal combustion engine car sales, four out of every five EVs now sold in China are produced by Chinese companies, according to data from Automobility, a Shanghai-based consultancy.
Stellantis, which was formed by the merger of Italian-American group Fiat Chrysler and France’s PSA in 2021, has found it difficult to compete in China. In July last year it dissolved a joint venture with Guangzhou Automobile Group, which ran a factory building Jeeps in the country.
Tu Le of Sino Auto Insights, an advisory company, said the investment in Leapmotor marked “quite a 180” for Tavares, who last year warned of growing Chinese government interference in western businesses operating in the country.
“This is an acknowledgment that the China market is too important to abandon and that Stellantis doesn’t have the capabilities themselves to be competitive,” he said.
The deal comes just a month after the EU announced an anti-subsidy probe into China’s EV industry in an attempt to shield European manufacturers before they are priced out by Chinese rivals.
Tu added that the deal would raise questions over Stellantis’s own strategy of selling smaller cars in Europe. “Will this mean that Chinese-built, Stellantis-badged vehicles will now make their way to European roads?”
In July, Volkswagen said it would invest $700mn in Chinese rival Xpeng in a move designed to boost the German car manufacturer’s lagging sales in the country. Smaller Chinese groups, including Shanghai-based Aiways and WM Motor have been hit by funding crises in recent months.
