In recent years, the landscape of the automotive industry has shifted dramaticallyChinese automotive companies expanded their capacities by exchanging land and capital for foreign investments, thereby establishing joint ventures that exemplified the strategy of "using the market to obtain technology." Today, the realm of Chinese electric vehicles is advancing rapidly, blazing a trail that surpasses the patent shields previously erected by traditional internal combustion engine vehiclesThis transformation is resulting in a new paradigm characterized by "exchanging technology for market access."

Despite internal voices at Leapmotor suggesting a reluctance towards such interpretations, the collaboration between Leapmotor and Stellantis is attracting attention

Following their partnership with European automotive giants, observers are keen to see how Leapmotor will assert its influence throughout this collaborative venture.

Leapmotor Secures Investment of 11.6 Billion RMB

In the wake of partnerships involving other Chinese electric vehicle brands such as XPeng with Volkswagen and Zhiji with Audi, Leapmotor has finalized its collaboration with Stellantis.

Recently, Leapmotor announced that Stellantis will invest €1.5 billion (approximately 11.6 billion RMB) to acquire around 20% equity in the company, thereby becoming a strategic investor

• Bank of Japan Reduces Bond Purchases, Yen Shorts React Quickly
• Apple Soars 7% to Record High; Major Indices Mixed
• Korea's Central Bank Cuts Rates to Tackle Economic Downturn
• Powell Warns Against Rapid Rate Cuts
• BYD Reports Over 10 Billion in Half-Year Profit

As part of this agreement, Stellantis will secure two seats on Leapmotor’s board of directors.

According to the subscription agreement, the subscription price stands at HK$43.8 per share, reflecting a 19.02% premium over Leapmotor's closing price of HK$36.8 on October 25. Notably, aside from the acquisition of 194 million new shares, Dahua Holdings will transfer its 7.88% stake in Leapmotor to Stellantis, earning approximately 4.548 billion RMB, thus severing its ties with Leapmotor.

Additionally, both parties will establish a joint company named “Leapmotor International” with a structure reflecting a 51%-49% ownership splitStellantis will appoint the CEO for that joint venture.

Sources indicate that Leapmotor International will have exclusive rights to export and sell its products to all global markets outside of Greater China

Leapmotor is projected to kickstart its export operations in the latter half of 2024, targeting Europe as its initial international market.

It's essential to highlight the substantial profile of Stellantis as an investor.

Stellantis is the product of a merger between the PSA Group and Fiat Chrysler, achieving a balanced 50%-50% ownership structureThis conglomerate encompasses fifteen diverse automotive brands, including Chrysler, Citroën, Dodge, DS, Fiat, Maserati, Jeep, Opel, and Peugeot, thus positioned across all market segments, from luxury to mainstream passenger vehicles, as well as heavy-duty pickups, SUVs, and commercial vehicles.

In just the first half of this year, Stellantis recorded net revenues of €98.4 billion, representing a 12% year-over-year increase, complemented by a net profit of €10.9 billion, marking a 37% rise

Last year, the company sold 6.34 million vehicles globally, generating total revenues of €179.6 billion, and a net profit of €16.8 billion.

As a long-standing European automotive powerhouse, Stellantis possesses an extensive array of resources abroad.

According to CEO Carlos Tavares, Stellantis currently holds market shares of 20%, 26%, 26%, and 15% in Europe, North America, Latin America, and the Middle East, respectivelyThe global team comprises members from over 70 different nations, enriching the company’s perspectives and strategies.

Tavares expressed high hopes for the partnership with Leapmotor, stating, “Stellantis has not been successful in the Chinese market, but Leapmotor ranks fourth among China's new power brands

It will greatly assist us in penetrating this critical market; to win in China, it is best to partner with a strong local company.”

The Rationale Behind the Collaboration

This collaboration holds significant implications for both Leapmotor and Stellantis in their respective market endeavors.

In an environment where competition between electric and traditional fuel vehicles is intensifying, many joint venture automotive firms have seen their market share diminish as they struggle to present compelling electric vehicle options

At one time, Stellantis's brands Peugeot and Citroën boasted domestic sales exceeding 700,000 units in China, but last year, sales plummeted to only 127,000 units, representing just 2% of the entire group’s sales.

In July of this year, Stellantis announced a strategic pivot, declaring plans to transition to a light-asset model for developing the Jeep brand in China after a lack of progress in acquiring a majority stake in the GAC Fiat Chrysler joint ventureThey are currently negotiating to terminate the local JV with GAC Group.

In this context, Stellantis urgently needs to develop a blockbuster product to stabilize its standing in the Chinese market and prevent further marginalization

Utilizing Leapmotor’s technology to produce a cost-effective model appears to be a feasible solution moving forward.

Stellantis has remarked that it will leverage Leapmotor’s technology-pioneering electric vehicle ecosystem to help achieve its “Dare Forward 2030” electrification strategyThe group is also receptive to exploring further synergies with its partners.

Leapmotor currently possesses two competitive technologies that could benefit StellantisFirst, the extended-range system, with the Leapmotor C11 extended-range version priced at just 149,800 RMB, alleviating concerns over driving range while maintaining affordability as an electric vehicle option; second, the four-leaf clover architecture, which integrates a Qualcomm 8295 chip and NXP S32G chip to consolidate four domains: cockpit, intelligent driving, power, and vehicle body

This architecture is anticipated to be implemented in Stellantis’s next-generation models, enhancing competitiveness in terms of smart connectivity.

Conversely, for Leapmotor, Stellantis's support is pivotal to its ambitions of expanding into international markets.

Leapmotor indicated during its announcement that it will capitalize on Stellantis’s extensive global commercial assets, strengths, and experience to accelerate the sales of its high-tech, cost-effective products worldwide.

Leapmotor Co-President Wu Qiang noted that the brand recognition for Chinese electric vehicle firms is still on the rise; however, establishing a foothold in overseas markets, including the establishment of direct outlets and after-sales services, requires substantial time, capital, and effort

Wu admitted that Leapmotor's resources are limited and cautioned that aggressive investments abroad during such a pivotal year for the development of new energy vehicles could yield poor returns, resulting in negative ramifications.

He stated that Leapmotor anticipates initiating exports with two to three models in the coming year, aiming to expand to 10-11 models by 2025 and 2026, “The configuration regarding whether these models are sold in a single country or across different nations will be assessed based on team operations at that time.”

“Selling with Gloves On” for International Expansion

In truth, Leapmotor recognizes its deficit in international market presence

CEO Zhu Jiangming candidly expressed, “Leapmotor achieves 98-99% of our sales in ChinaTo broaden our global market outreach, we need a reliable partnerStellantis excels in efficiency, products, service, and sales networks in various other regions.”

Simultaneously, Leapmotor's sales in China are showing signs of recovery, with total deliveries reaching 44,300 units in the third quarterHowever, due to lackluster performance in the previous two quarters, cumulative yearly sales stand at only 89,000 unitsEarlier this year, Leapmotor set an ambitious target of 200,000 units for the year, resulting in a completion rate of merely 44.5% through the first three quarters.

Zhu Jiangming emphasized that in the fast-evolving electric vehicle marketplace, sales numbers remain paramount

The company has set a target of achieving monthly sales of 30,000 units next year.

Leapmotor has clearly defined the role of its joint venture, Leapmotor International, as an entity responsible for marketing, sales, and customer serviceWu Qiang elaborated, “The joint venture serves as a figurative glove (representing Stellantis's resources) for Leapmotor as it reaches out into international marketsUltimately, it is Leapmotor’s electric vehicles that will be sold overseas.” For the overseas market, decisions regarding which countries Leapmotor’s products will enter, how models will be positioned, and the sales and promotional strategies will be jointly made, maintaining control within Leapmotor.

Moreover, Leapmotor's international endeavors and Stellantis's electric vehicle offerings will not conflict

Wu explained, “We will utilize their existing showrooms for our sales; however, certain features and showrooms will be established independently.”

He provided an example: a store in France might sell Peugeot and Citroën, featuring multiple logos at the entranceUpon entering, customers would see Leapmotor vehicles alongside other offerings, ensuring they recognize it as part of the Stellantis sales network.

As for whether “Leapmotor International” will be the sole entity responsible for international markets, Leapmotor has confirmed that they will not establish multiple versions of “Leapmotor International,” focusing instead on maximizing the utility of Stellantis's resources.