Stellantis-Leapmotor deal further sign Europe, China can’t disconnect EV industries
Stellantis burnt its fingers in China, but now wants to bring the country’s EVs to the rest of the world
Stellantis on Thursday said it will invest $1.6 billion to acquire roughly 20% of electric vehicle start-up Leapmotor, forming a joint venture to sell the Chinese company’s EVs in Europe and elsewhere – as soon as 2025.
Stellantis owns more than a dozen brands including European marques like Fiat, Alfa Romeo, Peugeot and Citroën, along with US stalwarts like Jeep, RAM trucks and Chrysler.
The deal also aims to boost the Italian-American company’s struggling efforts in the world’s largest car market. In 2022, Stellantis dissolved a Chinese joint venture making Jeeps with Guangzhou Automobile Group (GAC).
Hong Kong-listed Leapmotor, formed in 2015, has also found tough going in the highly competitive Chinese EV market.
Leapmotor’s market capitalization in Hong Kong is less than $5 billion, meaning Stellantis is paying something of a premium for its stake. Stellantis is the world’s seventh most valuable car company with shares trading in Milan now worth $58 billion after rising by more than a third year-to-date.
In terms of passenger EV sales through end-August, Leapmotor sits just outside the top 10 in China. The Hangzhou-HQed company has been slow to find new buyers for its battery electric and plug-in hybrid vehicles in 2023.
Sales of its models, like its C11 crossover SUV and T03 subcompact hatch have increased by only 2% year-to-date compared to the same period last year. Top Chinese manufacturer BYD managed to increase sales 60% in its home market this year despite selling 20-times the number of vehicles. Overall, the Chinese EV market has expanded by 28% in 2023.
Euro-Sino EV entanglements
Stellantis chief executive Carlos Tavares commented after the announcement: “We don’t want to be the victims of the Chinese offensive on the world, we want to be leading the way and controlling it.”
At the beginning of October, the European Commission formally launched a probe into Chinese support for its EV industry over complaints that global markets are being flooded with cheaper Chinese electric cars whose prices are kept artificially low by huge state subsidies.
France is changing its EV subsidy rules to exclude cars which have a high carbon footprint during manufacturing thereby all but eliminating the chances of made-in-China EVs would qualify. The EU may adopt similar rules at the end of its investigation.
The Adamas Intelligence EV Battery Capacity and Battery Metals Tracker shows that in the first half of 2023, 19% of all GWhs delivered to EV (and hybrid) buyers in Europe, including Britain and non-EU states, were contained in China-made EVs and packs. The majority were non-Chinese brands including Dacia, BMW and Tesla.
Adamas take:
The European Union putting barriers up to stem the tide of cheap Chinese EV washing up on its shores has an air of inevitability to it. The US Inflation Reduction Act has restrictions for unfriendly countries attempting to make market inroads built in.
The Stellantis-Leapmotor deal shows business imperatives and opportunities often trump considerations of state intervention in trade and industry. And the invisible hand of the market is stronger than heavy handed bureaucrats.
