Legacy automaker Stellantis (NYSE:STLA) — which owns Chrysler, Fiat and other car brands — announced today that it will invest $1.6 billion in Chinese electric vehicle (EV) maker Leapmotor. STLA stock is falling slightly in early trading on Thursday in the wake of the news.
The two companies’ joint venture (JV), which will be called Leapmotor International, will attempt to sell Leapmotor’s EVs in countries other than China. Moreover, Stellantis is also looking to use the partnership to sell more of its vehicles in the huge Chinese auto market.
“Through this strategic investment, we can address a white space in our business model and benefit from Leapmotor’s competitiveness both in China and abroad,” said Stellantis CEO Carlos Tavares.
STLA Stock: Stellantis, Leapmotor Form a Joint Venture
Speaking on a conference call, Tavares added that, with Chinese EV makers successfully penetrating many new markets, Stellantis hopes that the deal will enable it to benefit from the latter trend.
As CNBC notes, the joint venture deal will give Stellantis “access to Leapmotor’s technology and manufacturing footprint to help the European firm boost sales in China.”
Under the deal, Stellantis will have a 51% stake in the JV and two positions on Leapmotor’s board. Stellantis will also own an equity stake of about 20% in Leapmotor.
Leapmotor was launched in 2015 by an electronics engineer who had previously co-founded successful surveillance company Dahua. Last month, the Chinese EV maker’s deliveries came in at a record 15,800 units, although its deliveries for the first three quarters of 2023 increased only 1.4% year-over-year (YOY).
According to the South China Morning Post, Chinese automakers now have the “upper hand” in the domestic Chinese auto market, partly due to their success in the country’s EV space.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
