Stellantis NV is in discussions with China's Dongfeng Motor Group about a wide-ranging production partnership that could see Dongfeng build cars in Europe using Stellantis’s underutilized factories, a move that would reshape the continent's automotive landscape. The talks, reported by Bloomberg citing people familiar with the matter, are part of a major strategic rethink by the transatlantic automaker as it grapples with excess capacity in Europe and a sub-scale presence in China.
While no official statements have been released, the report indicates that representatives from Dongfeng recently visited Stellantis facilities in Germany and Italy to assess their manufacturing capabilities. The negotiations are said to be exploring multiple avenues, from a straightforward contract manufacturing agreement to a more substantial deal involving Dongfeng acquiring or taking a direct stake in one or more of the European plants.
The discussions are part of a broader strategy by Stellantis Chief Executive Officer Carlos Tavares to optimize the company's global industrial footprint. The potential deal could also involve Dongfeng manufacturing vehicles for some of Stellantis's 14 brands in China, where the company has struggled to gain traction. The automaker has also held talks with other Chinese electric-vehicle makers, including Xiaomi and Xpeng, signaling its openness to multiple partnerships.
A deal would provide Dongfeng, a state-owned auto giant, with a crucial manufacturing base inside the European Union, potentially allowing it to circumvent future tariffs on Chinese auto imports amid rising trade tensions. For Stellantis, it offers a path to monetize idle assets and reduce fixed costs, though any agreement would likely face intense scrutiny from European governments and powerful labor unions concerned about job losses and increased competition.
The potential partnership marks a significant pivot for both companies. Stellantis has been vocal about the challenges posed by low-cost Chinese EV exports to Europe. A deal with Dongfeng would represent a strategic shift from confrontation to cooperation, using Chinese manufacturing prowess to its own advantage. It would also be a tacit admission of its struggles in China, where its market share is below one percent.
For Dongfeng, which was a long-time partner of Stellantis's predecessor PSA Group, the move would accelerate its European expansion plans. Establishing a production foothold on the continent is a key objective for Chinese automakers looking to build brand credibility and avoid the logistical and political headwinds of exporting from their home market.
The specifics of any potential deal, including its value and structure, have not yet been disclosed. The negotiations are ongoing and may not result in a final agreement. However, the discussions alone highlight the deepening interdependencies between European and Chinese auto industries as the sector navigates the costly transition to electric vehicles.
This article is for informational purposes only and does not constitute investment advice.
