Any policy in the world that rejects free trade by closing itself off is a failure in a long-dimensional historical cycle. The cooperation between Amsterdam-based Stellantis and China Leap has opened a new path for Chinese companies to go global. It also proves that China's smart electric vehicles are not cheap overcapacity products.
Could it be that none of the brands under Stellantis, the world's fourth-largest automotive group, participated in the 2024 Beijing Auto Show?
The rigorous statement is that Leapmotor, as the largest shareholder of Stellantis, has become the only representative of Stellantis at the Beijing Auto Show.
Not only the entire French car Citroen, DS, Peugeot, and Renault Group were absent from the Beijing Auto Show, but Chrysler, JEEP, Dodge, and Fiat were also nowhere to be seen.
However, 10 days after the end of the Beijing Auto Show, Tang Weishi, the global CEO of Stellantis Group, appeared at the Hangzhou headquarters of Leapmotor on the evening of May 13, and Zhu Jiangming greeted him with a smile.
Since the two parties formed a global strategic partnership in October last year and completed the equity delivery on November 20, Stellantis Group has invested about 1.5 billion euros to acquire about 21% of the equity of Leapmotor, officially becoming the single largest shareholder of Leapmotor (Note: Zhu Jiangming, the founder of Leapmotor, and persons acting in concert occupy 23.5% of the equity of Leapmotor and are the de facto controllers of Leapmotor). Subsequently, Grégoire Olivier and Douglas Ostermann of the Stellantis Group joined the board of directors of Leapmotor, and the cooperation between the two companies has progressed rapidly.
Yesterday (May 14) afternoon, Stellantis Group and Leapmotor agreed to jointly invest in Leapmotor International Joint Venture with a 51%:49% share ratio. At present, the company has announced that it has completed all approvals and officially established and landed.
Headquartered in Amsterdam, the Netherlands, Leaprun International is headed by Mr. Xin Tianshu from the management team of Stellantis Group in China, and Chairman Zhu Jiangming is the chairman. The core senior management of Leaprun International is dominated by the Stellantis team, and some of them are senior executives of Leaprun.
It is interesting to note that the capital market has shown two opposing attitudes towards the two official announcements of cooperation between Leapmotor and Stellantis.
On October 26 last year, Tang Weishi announced that Stellantis Group would take a stake in Leapmotor, which was a major positive, but Leapmotor plunged 10.87% to close on the same day (see "What was lost?"). What did you get? An in-depth interpretation of Stellantis' investment in Leapmotor).
On October 26, 2023, Leapmotor plunged 10.87% to close
However, yesterday, Leapmotor rose 6.849%, and it is clear that the capital market is highly optimistic about this cooperation between the two sides.
However, if there is no holiday, good things are difficult to come in pairs. On the same day (May 14), U.S. President Joe Biden officially announced that the tax rate on Chinese electric vehicles imported from China will be increased from 27.5% to 102.5% this year, while for lithium-ion electric vehicle batteries, the tariff will be increased from 7.5% to 25% in 2024, according to the results of a four-year trade review with China. This means that the U.S. market has directly closed the door to Chinese electric vehicles (see "After the ZEEKR Lightning IPO, the Cold War for Electric Vehicles Officially Begins").
A week ago, on May 8, EU President Ursula von der Leyen said in an interview in Berlin, Germany, that Europe must prevent "heavily subsidized" Chinese electric vehicles from entering the European market, and that Europe welcomes fair competition, but does not want Europe to be flooded with a large number of "subsidized" Chinese electric vehicles, so the EU must take restrictive measures against this.
China's electric vehicles are not sensitive to the threefold tariffs in the United States, because the number of new energy vehicles exported from the mainland to the United States is almost negligible, while Europe is the first choice for all Chinese companies interested in globalization.
Europe and the United States are preparing to close the door to China's electric vehicles going overseas almost at the same time.
As a global auto giant with factories and business in Europe and the United States, can Stellantis Group help Leapmotor break through the strangulation of electric vehicles in China by Europe and the United States?
Faced with this question, Tang Weishi answered very realistically:
"If we can't export directly from Leap International, we can use Stellantis to produce and export in the regions we just mentioned, so that we can avoid these risks.
Different countries have different customs duties, so how do we circumvent them, and I think it depends on how we get a solution in our global network. It's an interesting collaboration for our company, because we can develop the best strategy for each country. ”
Regarding the impact that the upcoming EU review of China's electric vehicles on China's electric vehicles may have on the internationalization of Leapmotor, Tang Weishi explained:
First of all, local production must be the best business case. In a given market, we need to discuss two scenarios, whether there will be a tax increase on the production of electric vehicles in China or not, and according to this situation, we will choose the production location, and then consider the production and cost, which are very important criteria.
Production and cost This determines where our products are produced, for us, quality is the first, on the basis of excellent quality we think about cost optimization, so that we can meet the requirements.
Tang Weishi's words are simply as follows: in markets without tariff restrictions, Leapmotor is directly exported, and in restricted markets, Stellantis Group helps Leapmotor achieve localized production, that is, Leapmotor exports auto parts, and Stellantis Group is responsible for assembly and production.
It is this cooperation model that allows Zhu Jiangming to reorganize the business model of Leapmotor in three forms: Chinese market + overseas market + Tier1.
Both China and overseas markets are exported in the form of the Leap brand, and in the regional markets that encounter trade barriers, Leap has shrunk to a Tier1 model.
Specifically, in the Chinese market, Leaprun's product strategy is to focus on the mid-to-high-end products with the largest sales volume of 100,000-200,000 yuan. In the next three years, Leapmotor will launch 2-3 products every year, divided into three price bands: 100,000, 150,000, and 200,000, and each price band will cover SUVs, sedans, Cross or MPV, etc. Meantime. Each price includes three cars, forming a product matrix that will cover the entire Chinese market.
In terms of power, both the C-segment and D-segment cars adopt a dual-power strategy, with both extended range and pure electric power. The entire domestic market is operated by Leaprun's own team.
In overseas markets, Stellantis' overseas distributors, excellent parts distribution system, and factories around the world can promote the globalization of Leapmotor products.
In the third mode, some of Leaprun's electronic core components can be sold to Stellantis and other OEMs, which is also a branch of Leaprun in the future.
The combination of these three modes can be understood as the overseas mode of Leapmotor jointly conceived by Leapmotor and Stellantis.
The core of this model is to retain the Leapmotor brand in the place of free export, and in the restricted market, Leapmotor will export parts (central electronic and electrical architecture, CTP, etc.) in the Tier 1 mode to maintain cost performance, achieve local production through Stellantis, and realize Stellantis' product layout in the field of electrification.
Of course, this model is not suitable for most Chinese car brands, because Leapmotor and Stellantis have achieved a deep equity bundle.
In November last year, after the closing of the equity settlement between the two parties, Stellantis has become the largest shareholder of Leapmotor, and the Dahua Group, which was sanctioned by the United States, has completely withdrawn, and with the establishment of the overseas company of the joint venture between the two parties, Stellantis, which accounts for 51% of the shares, has become the controlling party of Leapmotor International.
The deep binding of the interests of both parties has allowed Leapmotor to successfully open up overseas channels, and Stellantis has realized its electrification layout, giving birth to a new model that can still realize its electrification plan in 2030 even as a traditional overseas auto giant that actively slows down its electrification layout.
Let's briefly sort out Leap International's overseas plan:
Leapmotor International will first start sales in Europe in September 2024 and plans to expand its sales network to 200 sales outlets in Europe by the end of this year. From the fourth quarter of this year, the company will enter India and Asia-Pacific, the Middle East and Africa, and South America.
In this list of countries going overseas, it can be seen that there is no US market.
In the planning of Europe, Tang Weishi introduced that the first step will be to introduce Leap models in 9 European countries, including Belgium, France, Italy, Germany, Greece, the Netherlands, Romania, Spain, and Portugal. "These nine countries are the first European markets we will enter."
The first of the three other important markets to enter in the fourth quarter of this year was South America, including Brazil and Chile.
South America is second only because Stellantis is not only the No. 1 automotive group in South America, but also has its own manufacturing base and a large dealer network, as well as in the Middle East, Africa and the entire Asia-Pacific region: Australia, New Zealand, Thailand, Malaysia, India.
This is by far the most ambitious roadmap for a Chinese auto brand to go global, and Stellantis Group can be said to be unreservedly cooperating with Leap.
In terms of products going overseas, Leapmotor International first launched two models, the A00-class T03 and the B-class C10, and in the next three years, Leapmotor International said that it would launch at least one new model every year.
What impact will this cooperation between Leapmotor and Stellantis Group have in the future - it is foreseeable that this may become a new form of interaction between the joint venture brand and China's new EV manufacturers.
Purely focusing on sales, Leapmotor has always been in the third place in the camp of new car-making forces. In 2023, Leapmotor delivered 144155 vehicles throughout the year, achieving revenue of 16.75 billion yuan, a year-on-year increase of 35%, and the annual gross profit margin turned positive; At the same time, it had abundant cash flow of 19.33 billion yuan, and its operating cash flow reached 1.08 billion yuan, turning positive for the first time in the whole year.
From this report card, it can be glimpsed that Leap is expected to become another fully profitable car company after the ideal, which is the best New Year's gift that Zhu Jiangming received in this year.
If we look at this cooperation from a larger dimension, it will also boost the morale of Chinese and foreign automakers who are caught in the industrial cold war situation.
Tang Weishi said: "We don't want to see the world shattered and divided. ”
Zhu Jiangming commented on Stellantis Group: "Through 200 days of cooperation, I feel that Stellantis is similar to China's private enterprises, and its work attitude, time and efficiency are indeed very fast, including decision-making. I am glad that Stellantis Group has exceeded our imagination in terms of KPIs for the team, and it is unthinkable that Leaprun International will be able to achieve no loss and profitability in the first year. ”
Tang Weishi politely responded to Zhu Jiangming's praise: "In the past 200 days, many things have been agreed between Mr. Zhu and our CEO. We don't want to slow down Zero, and we want to show our partners that Stellantis is a big company, but it can go fast. ”
He even said emotionally: "You can see that the two sides have a lot in common, this is the spirit of our cooperation, we are all runners, we are all running enterprises." ”
Today, the Stellantis Group operates in more than 130 countries and manufactures in more than 30 countries. In 2023, more than 6.168 million vehicles will be sold (excluding sales of its joint ventures), and its net profit will reach 18.6 billion euros. The world's fourth-largest auto group, which has adopted a light operation model in the Chinese market, can also allow Chinese auto industry insiders to objectively view the scale of the world auto market.
So, back to the original question at the beginning: can the Leapmotor model allow Leapmotor to enter the U.S. market with reasonable tax avoidance? Will the EU's investigation into China's electric cars bypass Leapmotor because of Stellantis?
In fact, this question has been answered when Chinese and foreign automakers really start to cooperate.