Thursday, Stellantis (ticker: STLA) has made a significant move in the electric vehicle (EV) market by announcing a massive $1.6 billion investment in Chinese EV maker Leapmotor (9863.Hong Kong). This strategic partnership has the potential to bring Chinese-made EVs to the U.S. market.
A Promising Joint Venture
As part of this deal, a joint venture will be formed to handle the export, sale, and manufacturing of Leapmotor products outside greater China. Stellantis will hold a majority stake of 51% in this venture.
Such a collaboration paves the way for Chinese-built battery electric vehicles (BEVs) from Leapmotor to be made available at Jeep dealerships across the United States. However, Stellantis has yet to provide any details or comments regarding specific export locations.
Exploring New Frontiers
Currently, there is a dearth of Chinese EVs in the U.S. market. While VinFast Auto (VFS), based in Vietnam, offers a BEV that is geographically close, it is not a direct representation of Asian technology. Polestar Automotive (PSNY), on the other hand, manufactures its EVs in China but traces its origins back to its Swedish parent company, Volvo.
In contrast, industry giants like Kia (000270.Korea), Hyundai Motor (005380.Korea), Mazda (7261.Japan), Nissan (7201.Japan), and Toyota Motor (TM) have successfully carved out their presence in the U.S. market with both gasoline-powered vehicles and BEVs.
A New Era Begins
With this monumental investment, Stellantis aims to bring Chinese electric vehicles into the American mainstream. This exciting development could reshape the landscape of the U.S. EV market, offering consumers more choice and diversifying the range of available options. As the venture unfolds, industry enthusiasts eagerly await the arrival of Leapmotor's high-quality EVs on American roads.
Chinese EVs Making Their Way to Europe
Chinese electric vehicles (EVs) are making their mark in the European market, and it's not by accident. Safety regulations in China and Europe align more closely than those between China and the U.S., making it easier for Chinese automakers to export to Europe before tackling the challenging U.S. market.
According to Citi analyst Jeff Chung, the decision to export EVs via the Stellantis joint venture is a bold and creative move. He considers it a remarkable strategy, with Chinese EV export growth expected to accelerate while domestic Chinese EV sales growth begins to slow.
However, domestic Chinese EV sales face a penetration problem. Battery electric and plug-in hybrids already account for more than 30% of new car sales in China.
Despite the positive outlook, Leapmotor shares experienced an 11% drop in overseas trading, possibly due to concerns of dilution. Once all agreements are finalized, Stellantis will own approximately 20% of the company.
On a rather sluggish day for markets, Stellantis stock was down 0.8% in premarket trading. S&P 500 and Nasdaq Composite futures showed decreases of 0.3% and 0.5% respectively.