Auto manufacturer Stellantis collaborates with CATL, a Chinese battery company, and Leapmotor, a Chinese EV manufacturer, to produce electric vehicles for European markets.

In a strategic move to bolster its electric vehicle (EV) production in Europe, automaker Stellantis has formed partnerships with Chinese companies Leapmotor and Contemporary Amperex Technology (CATL).

Leapmotor will collaborate with Stellantis for international vehicle sales, while CATL will be responsible for supplying batteries for Stellantis' electric vehicles. This partnership aims to boost European output, allowing Stellantis to avoid duty costs while still leveraging the expertise of cost-competitive Chinese players.

Stellantis' strategy is particularly significant given the challenges faced by other automakers. For instance, BMW sells 32% of its new vehicles in China and exports Chinese-made EVs to Europe. Shifting production to Europe could impact BMW's Chinese operations, making it a more complex endeavour.

In contrast, Stellantis has a minimal presence in the Chinese market, with only 1% of its new vehicle sales there. This makes it easier for the company to focus on Europe, where it is concerned about less expensive Chinese EVs entering the market.

To further reduce costs, Stellantis is working towards achieving its goal of reducing annual costs by EUR 5 billion (USD 5.39 billion) a year ahead of schedule in 2024. As part of this strategy, the automaker has suspended its plan to construct new facilities for lithium-ion batteries in Germany and Italy, while considering producing Lithium Iron Phosphate (LFP) batteries at those sites instead. LFP batteries, which do not require rare metals, are relatively inexpensive to produce.

Stellantis will also revise its battery production plans to make better use of CATL's expertise. The CEO of Stellantis, Carlos Tavares, has stated that Chinese players have a 30% cost-competitive edge against the Western world in EV production.

In addition to its partnership with CATL, Stellantis has teamed up with Chinese EV startup Leapmotor in the Netherlands. The companies are considering producing Leapmotor EVs at Stellantis facilities in Europe for sale in nine countries, including Germany, starting in September.

However, the European Union has announced additional tariffs of up to 38% on Chinese EV imports, citing unfair subsidies from Beijing. Stellantis' CEO, Tavares, questions whether these new tariffs can bridge the cost competitiveness gap between European and Chinese players.

This article was first published on Nikkei Asia, and is being republished as part of 36Kr's partnership with Nikkei.

Auto manufacturer Stellantis collaborates with CATL, a Chinese battery company, and Leapmotor, a Chinese EV manufacturer, to produce electric vehicles for European markets.