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Stellantis has finalised a €1bn deal with Chinese state-owned Dongfeng to produce Peugeot and Jeep vehicles in China as the European group tries to establish a foothold in the world’s largest car market at a time of upheaval across the industry.
The owner of the Fiat, Peugeot and Jeep brands said on Friday that under a joint-venture arrangement with Wuhan-based Dongfeng the new models would be produced for the Chinese market as well as for export.
The announcement is the latest move by Stellantis chief executive Antonio Filosa as he tries to revive the group after years of weak sales in Europe and the US.
The project will see combined investment of more than Rmb8bn (€1bn), with Stellantis contributing €130mn.
The deal highlights how western companies are forced to co-operate with Chinese rivals in a bid to keep pace with China’s rapid progress in developing software, batteries and autonomous vehicle systems needed as the world transitions to electric vehicles.
It is also the latest example of a foreign group announcing plans to export more EVs made in China. Such a strategy leverages lower costs and advanced technology from China but risks eroding the market share of factories in other parts of the world.
Stellantis said the deal would be “powered” by favourable industrial policies of the Hubei province, highlighting how foreign groups benefit from Chinese state policies that have been criticised by European and US officials.
The European company said Dongfeng’s Wuhan plant would be used from 2027 to produce two new Peugeot-badged new energy vehicles for China as well as export, along with two new Jeep off-road hybrids for global markets.
Expanding sales in China is likely to prove difficult. Car sales have been slowing in China this year with those of petrol cars collapsing and EV growth tempering after an explosion in demand over the past five years.
In addition to problems of overcapacity and China’s brutal price war, Chinese buyers no longer favour foreign brands. As a result their share of the domestic market fell to about 30 per cent last year compared with 64 per cent in 2020.
The deal marks a rekindling of a relationship between Stellantis and its former partner in Dongfeng, which has retained a stake in the European carmaker.
It comes just a week after Stellantis said it was expanding its partnership with China’s Leapmotor. Under that deal the European company will transfer one of its two Spanish factories to the Chinese group, which specialises in cheap EVs.
Stellantis is separately in discussions with Dongfeng about expanding their collaboration into European production.
The partnership with Stellantis is a rare piece of positive news for Dongfeng. The legacy Chinese carmaker — like many foreign groups — has been left behind as upstarts including BYD and Leapmotor have embraced newer EV technology.
