What are Stellantis' plans for the Chinese e-car brand Leapmotor in Europe?

Recently, Stellantis CEO Carlos Tavares once again made it clear in no uncertain terms that profitability is his top priority and that he is prepared to slaughter sacred cows. "If they don't make money, we will close them. We can't afford to have brands that don't earn anything," explained the Portuguese businessman when he had to announce a drastic slump in Stellantis' profits, which fell by five billion euros to 5.9 billion euros in the first half of 2024.

This raises the question of what role Leapmotor should play in the Stellantis Group. After all, the newcomer is not the only Chinese car manufacturer coming to Europe with big ambitions. Others with similar ambitions have already miscalculated. Great Wall Motor (GWM), for example, has already closed its German branch. In addition, the electromobility boom is currently experiencing a dip.

Leapmotor is comparatively small compared to the other Chinese e-car manufacturers: In July, the company only delivered its 400,000th car since it was founded in 2015. Figures that only make BYD managers smile wearily. Carlos Tavares cannot and does not want to afford another drag on his leg. But the Portuguese businessman does nothing without calculation and certainly does not invest 1.5  billion euros to become the majority shareholder in a Chinese car manufacturer. The plans are certainly ambitious. Leapmotor wants to establish 200 sales outlets in Europe by the end of this year and 500 by 2026. This is only possible if the Chinese use the Stellantis sales network.

Is there a threat of cannibalization?

It gets interesting when you look at the two models with which Leapmotor wishes to be successful in Germany and Europe. The 4.73 meter-long BEV SUV C10 is a competitor for Tesla[ ]Model[ ]Y (test) and Skoda[ ]Kodiak, while the T03 small electric car in the sub-20,000-euro class is intended to outperform Dacia[ ]Spring (test) and BYD Seagull. So far, so good. But in the Stellantis Group there are brands such as Citroën with the ë-C3 (test) or Fiat (with the Panda) that want to be successful in the entry-level segment. Not to mention Opel and Peugeot. Cannibalization is imminent.

"The BEVs from Leapmotor have a different market positioning compared to those from Stellantis in Europe. Leapmotor is primarily aimed at young and tech-savvy consumers who value intelligent functions, connectivity and personalization in their vehicles. Leapmotor is therefore not a threat, but an additional opportunity," Stellantis explains. The Leapmotor product plan up to 2027 is already in place: the C10 and T03 are to be followed by two more SUVs and hatchback models.

The reality is likely to be different in the highly competitive market. But Carlos Tavares is thinking in other dimensions. He knows that a large automotive group can only be successful in the long term if it has a competitive offering in all key regions. "With the strategic investment in Leapmotor, we can benefit from the brand's competitiveness - both in China and elsewhere," replies Stellantis when asked. The aim is to position itself in future markets such as South East Asia, India and South America. However, electromobility is often still a change to the future there.

Initially, Volkswagen wanted to have Leapmotor

To get to the bottom of the more important reason for the new acquisition, it is worth taking a look at the past. When PSA Peugeot Citroën took over Opel in 2017, Carlos Tavares also brought the expertise of German engineers on board. Similar to Opel, the Chinese have expertise in infotainment and connectivity that every car manufacturer is desperately looking for. It is not without reason that Volkswagen also negotiated with Leapmotor. However, Stellantis was awarded the contract for a comparatively modest 1.5  billion euros, while the Wolfsburg-based company acquired Rivian. Up to five  billion euros are on the table.

"It's clear that every major manufacturer needs attractive electric options in its model portfolio in the short term. In addition, the industry is working on bringing the software revolution that we are experiencing into the car," says Peter Fintl from the management consultancy Capgemini, adding: "This reverses the situation: In Western-Chinese joint ventures in the Middle Kingdom, the foreign partners have always been responsible for technology and know-how and the domestic companies have mainly been concerned with efficient production and sales. Now Chinese electrical specialists are suddenly seen as technology partners."

You might think that Stellantis is sucking out knowledge like some kind of technology vampire. This is not the case. The partnership is not a one-way street. "Due to the extremely intense cut-throat competition in the Chinese car market, only very few providers can generate sufficient profits. New sources of revenue such as technology licensing or development partnerships are therefore very welcome.

At the same time, Western companies understand their domestic markets best and can make new technologies accessible to their customers attractively. You can definitely speak of a win-win situation", Peter Fintl explains. So Stellantis also benefits. If Leapmotor also becomes a success story in China and Carlos Tavares' overriding maxim of profitability is fulfilled.

(anw)