Stellantis Explores Canada EV Production With China's Leapmotor, Risking US Tariff Ire

Stellantis NV is exploring building electric vehicles in Canada with Chinese partner Zhejiang Leapmotor, a move that could reshape North American auto manufacturing but risks drawing tariffs from the United States.

Stellantis NV is in early talks to build electric vehicles in Canada with its Chinese partner Zhejiang Leapmotor Technology Co., a strategic pivot that leverages a 2023 joint venture to navigate trans-Pacific trade tensions and utilize an idled Canadian factory. The discussions, which remain preliminary, could represent the first major Chinese auto investment in Canada since the two countries agreed in January to lower tariffs on Chinese-made EVs.

"We are in active discussions with government officials and key stakeholders to ensure that the conditions for success are in place to support continued investment in Canada," Stellantis said in a statement, while not mentioning Leapmotor directly. Canadian Industry Minister Melanie Joly confirmed discussions are ongoing, stressing that any new investment must prioritize Canada’s supply chain and labor.

The discussions center on Stellantis's assembly plant in Brampton, Ontario, which was idled in 2024. The move follows a $1.6 billion deal where Stellantis acquired a 21% stake in Leapmotor and formed a 51%-controlled joint venture, Leapmotor International, to build and sell Leapmotor cars outside China.

The potential partnership places Stellantis and Canada in a precarious position, caught between a January 2026 Canada-China agreement to lower EV tariffs and warnings from Washington that it will not allow Canada to become a backdoor for Chinese vehicles into the U.S. market.

A Factory's Contentious Future

The Brampton assembly plant has been a point of friction between Stellantis and the Canadian government. The facility was originally slated for retooling to produce a new Jeep SUV in 2025. However, Stellantis paused the retooling and moved production to an Illinois facility after former U.S. President Donald Trump imposed tariffs on Canadian goods.

The decision prompted the Canadian government to threaten legal action to claw back several million dollars in subsidies previously granted to the automaker for its commitment to maintain its Canadian manufacturing footprint. The two parties entered dispute settlement proceedings in November to bring production back to the plant, with the Leapmotor collaboration now emerging as a potential solution.

Navigating Geopolitical Tensions

The proposal to build Chinese-designed EVs in Canada is a strategic maneuver to mitigate the impact of tariffs and reduce reliance on direct exports from China. By co-producing vehicles in North America, Stellantis could potentially serve both the Canadian and U.S. markets, though this hinges on navigating complex trade rules and avoiding punitive measures from Washington.

U.S. government officials have repeatedly warned Ottawa that it could face retaliation if Canada is used as a staging ground for Chinese vehicles to enter the United States. It remains unclear what conditions might be placed on a Stellantis-Leapmotor venture in Canada to appease U.S. concerns, highlighting the significant geopolitical risks attached to the preliminary talks.

This article is for informational purposes only and does not constitute investment advice.