Stellantis says U-turn on China will help it beat EV rivals

STELLANTIS says its US$1.1 billion purchase of a stake in a Chinese electric vehicle (EV) maker will help it offer more affordable EVs and gain an edge on rivals bracing for an onslaught of cheaper exports from the country. “The Chinese offensive is visible everywhere,” chief executive officer Carlos Tavares told reporters on a call on Thursday (Oct 26). Through the deal with Zhejiang Leapmotor Technologies, “we can be benefiting from this Chinese offensive rather than being a victim”. Stellantis will end up with about 21 per cent of Leapmotor and two board seats after the deal. Crucially for Tavares, it will also have a controlling stake in a joint venture that will allow Stellantis – the maker of Jeep SUVs and Peugeot and Fiat automobiles – to build and sell some Leapmotor cars outside China. The European Union last month launched an investigation into Chinese subsidies for EVs to ward off a flood of low-cost imports. Stellantis earlier this month unveiled its e-C3, the cheapest Europe-made EV, with a starting price of 23,300 euros (S$33,694), a key model at a time when some countries, notably France, are changing their incentive systems to subsidise locally made cars. Leapmotor’s technology and its better insights into China’s EV supply chain will enable Stellantis to produce cheaper EVs, without relying on the outcome of the EU’s probe, Tavares said. “A probe is like giving you a shot to go to sleep,” the CEO said. It “can represent a bad excuse not to do the right things at the right speed to compete with my Chinese competitors. I have to race”. The tie-up marks the second deal in three months between an established auto giant and a little-known Chinese EV company, after Volkswagen (VW) agreed to take a US$700 million stake in Xpeng. The spurt of deal-making shows how important China has become in the global transition to EVs. Stellantis has struggled to gain traction in China, compared with the likes of VW and BMW. The deal with Leapmotor comes just days after Stellantis decided to end manufacturing in China, a country that in the past Tavares had described as risky in geopolitical terms. The about-face shows he’s willing to be pragmatic to better compete with local champions such as BYD, which offers a broad range of battery-powered cars suited to local tastes. “Ten years down the road, you would not like to think that we are missing a fair share of the biggest market in the world,” Tavares told analysts on a call. “There is a point in time where we need to find the right formula to have a productive and added-value exposure” to China. Thanks to the joint venture, Stellantis will be “in the driving seat for the exports and we are in the co-driving seat for the Chinese market”, the 65-year-old CEO said. Bloomberg News first reported in August that Stellantis had been exploring an investment in a Chinese EV company such as Leapmotor. Apart from the purchase of a stake directly from its new partner, Stellantis bought another 90 million Leapmotor shares from selling shareholders for about US$460 million. Chief financial officer Natalie Knight told analysts the China investment will not diminish opportunities to return capital to Stellantis investors.

Trojan horse?

Leapmotor vehicles will arrive in Europe in two years, at the latest, according to Tavares. Its EVs may end up being assembled in Stellantis plants around the world, including the US, if tariffs imposed on them will otherwise be too steep. Tavares brushed off the notion that the Leapmotor deal could turn Stellantis into a conduit for Chinese EV manufacturers trying to take over the European market. The key to this deal, unlike the Volkswagen investment in Xpeng, is that Stellantis will remain in charge, he said. “We are not a Trojan horse, because we are controlling their export business,” Tavares said. “We are supporting that profitable sales growth for our own benefit and that makes the whole difference.” BLOOMBERG