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Outnumbered. Stellantis’ plan to invest $1.6 billion in Chinese electric-car maker Zhejiang Leapmotor Technology could help the $57 billion maker of Jeep and Citroen cars to speed up CEO Carlos Tavares’ green ambitions.
But the EV shortcut has two drawbacks. First, it does not come cheap. At HK$43.8 per share, the deal for a 21% stake in Leapmotor values the company at $7.5 billion, more than four times its total sales in 2022. That’s relatively rich; the average multiple for bigger peers Nio, Xpeng, Li Auto and BYD is around 2.6, LSEG data shows.
Second, handing a large sum to a Chinese EV competitor could draw scrutiny just as Tavares is navigating tense pay talks with the United Auto Workers in the U.S.: Stellantis can hardly be seen to skimp on salaries when it has money to splurge on investments in the world’s second-largest economy, even as relations between Washington and Beijing remain sour. And pressure has intensified after rival Ford Motor on Wednesday agreed to a 25% wage hike, a boost in retirement contributions, and the elimination of lower pay tiers for certain workers. Facilitating the globalisation of a competitor from the People’s Republic could play poorly during negotiations. Chinese upstarts such as Leapmotor are an alarming new threat to the U.S. auto industry, as Henry Ford’s great-grandson and current chair of the eponymous company Bill Ford warned earlier this month.
Stellantis’ New York-listed shares fell more than 2% on Thursday after unveiling the deal, and Leapmotor’s stock dropped more than 10% in Hong Kong. Tavares will have to drive hard to prove his new partnership can pay off in Europe and beyond.
Context News
Stellantis, owner of Jeep and Peugeot, said on Oct. 26 it was planning to invest 1.5 billion euros ($1.6 billion) to acquire a stake in China’s electric-vehicle maker Zhejiang Leapmotor Technology. Stellantis and General Motors were in intensive talks on Oct. 26 with the United Auto Workers in an effort to end a six-week-old strike. Ford Motor and the UAW union, which represents many of the carmakers’ U.S. employees, said on Oct. 25 they had reached a tentative agreement on a new contract. Shares in Stellantis fell 2.2% after the deal with Leapmotor was announced on Oct. 26.
