Stellantis (STLAM.MI) plans to build an electric vehicle (EV) battery plant with China's CATL (300750.SZ) in Europe, its fourth one in the region, as the European carmaker seeks to make cheaper batteries and more affordable EVs.
The EV battery plans also mark a further strengthening of ties with China after the Franco-Italian carmaker shut down its previous JV, Guangzhou Automobile Group (601238.SS), last year. Last month Stellantis announced a $1.6 billion deal to buy a stake in Chinese EV maker Leapmotor (9863.HK).
Stellantis and CATL on Tuesday announced a preliminary agreement for the supply of lithium iron phosphate (LFP) battery cells and modules for the automaker's EV production in Europe and said they were considering setting up a 50-50 joint venture in the region.
Tthe JV plan with CATL was aimed at building a new gigafactory in Europe to make LFP batteries, said Maxime Picat, Stellantis Global Head of Purchasing and Supply Chain.
LFP batteries are cheaper to produce but less powerful compared with nickel manganese cobalt (NMC) ones, the other current mainstream technology.
Discussions were ongoing with CATL on the JV plan and a few more months were needed to finalise it, Picat said, declining to provide details about the possible location of the new battery facility. It would be CATL's latest investment in the region, as it expands outside its home market.
Europe's carmakers and governments are pouring billions of euros into building battery plants on their home turf to reduce their dependency on Asia. At the same time, Chinese battery makers like CATL are building plants in Europe for European-made EVs.
Picat said the deals with CATL would complement the group's electrification strategy, with LFP batteries helping cut production costs in Europe, while maintaining output of NMC batteries for more expensive cars.
LFP batteries fit Stellantis low cost EVs such as the recently-unveiled Citroen e-C3, which now costs as little as 23,300 euros ($25,400) and whose price is projected to be further cut to around 20,000 euros for its shorter-range version.
Picat however said LFP batteries, which compromise between autonomy and cost, would have a wide scope within the group, as affordability was key.
"Definitely what we are aiming at is to grow those LFP batteries on multi-segment, because affordability is needed on many different segments, being passenger vehicle or potentially commercial vehicles," he said.
In Europe, Stellantis -- the owner of brands including Jeep, Peugeot, Fiat and Alfa Romeo -- is building three gigafactories, in France, Germany and Italy through its ACC joint venture with Mercedes (MBGn.DE) and TotalEnergies (TTEF.PA), specialising on NMC chemistry.
Under Tuesday's agreement, CATL will initially supply LFP batteries to Stellantis for EVs in its passenger car, crossover and small and medium sized SUV segments. ($1 = 0.9168 euros)
