Automotive group Stellantis announced on Wednesday it had signed a memorandum to establish a joint venture with China's Dongfeng to share manufacturing, sales, and engineering operations in Europe.
The deal to bolster sales as the European Union pushes carmakers to produce more clean-energy vehicles will see Dongfeng's Voyah EVs built at Stellantis's plant in Rennes, western France, for the European market, the companies said in a statement.
By building locally, Dongfeng can avoid hefty EU tariffs on Chinese EV imports imposed as a way to protect domestic automakers.
It is the latest move by Stellantis chief Antonio Filosa to revive sales and profits at the world's fourth-largest automaker, in particular in Europe, where the shift away from combustion engines has sputtered.
The company announced earlier this month a deal with Dongfeng to build Jeep and Peugeot models for the Chinese market, and increase cooperation on technology research and development.
Dongfeng and other Chinese carmakers, meanwhile, are looking to Europe and other export markets as their home market remains tough, with consumer spending slumping.
Brands such as BYD, Chery, Geely, Leapmotor, Jaecoo, and XPeng were virtually unknown three years ago in Europe.
Stellantis will lead the Europe joint venture with a 51% stake, while Dongfeng will have 49%. Financial details were not disclosed.
"With this new chapter in our collaboration, we will give our customers an even greater choice of competitive products and pricing, leveraging the best of Stellantis's global footprint alongside Dongfeng's access to China's advanced new energy vehicles ecosystem," Filosa said in a statement.
Dongfeng's Chairperson Qing Yang said in the statement: "Through coordination in technology, branding, and global markets, it will unlock greater value from the joint venture, accelerate Dongfeng's global expansion, (and) support Stellantis's global strategic shift and China presence."
The Rennes plant has been operating well below capacity for years as demand in the European auto market remains well below pre-COVID levels, and it currently produces only a high-end Citroen SUV.
Stellantis announced Tuesday that it would start building smaller, low-cost electric cars for the European market as buyers increasingly look to rival Chinese models.
EU rules call for 90% of all cars sold in the bloc to be electric by 2035, and the European Commission recently created a new, tax-friendly category for small EVs to encourage demand.
Stellantis, formed from the merger of France's PSA and Italy-based Fiat Chrysler five years ago, said its Dongfeng Peugeot Citroen Automobile joint venture had built over 6.5 million cars in China since its creation 34 years ago.
Filosa is set to lay out the company's strategy to jump-start sales and profits for its 14 brands at an investors' day in Michigan, the heart of the U.S. auto industry, on Thursday.
