Italian carmaker Stellantis plans to begin selling Chinese EVs in Europe this year, marking the latest strategic partnership between a European car manufacturer and an ultra-cheap Chinese competitor.

The group behind Peugeot, Fiat, and Alfa Romeo said the company would begin selling two Leapmotor models at its European dealerships in September. The cars, priced below €20,000 ($21,700), will begin selling in the U.K. from March next year.

Stellantis announced back in October that it had invested €1.5 billion ($1.6 billion) to acquire a 21% stake in Leapmotor, the Hangzhou-based automaker founded in 2021.

The company’s chief executive Carlos Tavares acknowledged Tuesday that the threat of Chinese EVs factored into Stellantis’s decision to partner with Leapmotor. 

Chinese-made cars are expected to account for a quarter of EVs sold in Europe this year, according to campaign group Transport & Environment.

“Whether I like it or not they are grabbing share,” Tavares said, as reported in The Guardian. “What I can do is leverage that dynamic.”

It is a major step in an evolving relationship between European and Chinese automakers, with the former becoming increasingly aware that their efforts to completely stop an onslaught from the East are futile.

Last year, Volkswagen entered into an agreement with Chinese competitor Xpeng that saw the German giant pump $700 million into the group in exchange for a 4.99% stake. 

In Tavares’ view, these partnerships are a natural progression as EV hype dies down on the continent amid a slowing economy and increased demand for hybrids.

“History shows that the European consumer always arbitrates in favour of pricing—and as soon as European governments stopped incentives the demand for EVs collapsed,” Tavares said, the FT reported.

Tariffs

Tavares also threw in a dig at Biden’s latest protectionist move to prevent Chinese EVs from disrupting the U.S. market. 

The White House passed new laws that means those importing cars from the likes of BYD will be slapped with a 100% tariff. It was the latest escalation in a gruesome trade war between the U.S. and China.

Tariffs on Chinese automakers have been discussed in Europe, and are expected to be implemented once a European Commission probe into anti-competitive practices is concluded. 

However, they are unlikely to be effective, given the massive profitability gap between Chinese EVs sold at home and those sold in Europe. 

Research from Rhodium Group suggests only a tariff in excess of 50% would be enough to impact Chinese automakers’ decision to continue their aggressive expansion into Europe. 

However, given Europe’s close trade links with China, that figure would likely be unpalatable to policymakers.

Tavares was less keen on Biden’s move on tariffs, saying they were “just going to end up with more inflation inside the bubble.”

He added: “Protectionism has a lot of drawbacks. They don’t appear immediately; they appear one after the other.”