Stellantis builds sub-£20k Leapmotor EV in Poland as tariffs hit

Chinese EV maker Leapmotor has started production of the T03 electric city car in Poland after proposed EU tariffs came in higher than expected, executives have reportedly said. Full production will begin in September, Leapmotor told analysts at an event last week, according to investment bank Jefferies. The 3.6m-long four-seater, a rival to the Dacia Spring EV, is one of two cars that begins Leapmotor’s entry into Europe after Stellantis paid €1.5 billion for a 21% stake in the firm and control over its exports. UK sales of Leapmotor cars will begin in March 2025. Production of the T03 will be followed by the A12 compact SUV at Tychy, starting in the first quarter of 2025, Jefferies said. The plant currently makes the petrol Fiat 500 and new Jeep Avenger and Alfa Romeo Junior. Stellantis’s decision to build Leapmotor cars from kits in Europe follows the EU's announcement last week that Chinese EV makers would be subject to additional tariffs that take into account the increased levels of state subsidies handed to the Chinese EV industry. The European Commission said it was waiting for a response from the Chinese authorities before applying the tariffs, but if no resolution is forthcoming, Leapmotor exports would be taxed at 31% of the cost of the car. “The tariff hike came slightly above the upper end of Leapmotor’s estimated range of 25%-30%, [so] the company now appears keen on advancing its localisation efforts,” Jefferies analyst Xiaoyi Lei wrote in a note. Building in Poland will boost the gross profit of the T03 to 16% per car, compared with just 5% for imported models incurring the 31% tariff, assuming a €20,000 start price for the car, Jefferies said. Stellantis CEO Carlos Tavares last week confirmed that "a certain number of [Leapmotor] products will have to be assembled in Europe" during the company's capital markets day presentation. The decision on whether to build Leapmotors locally or import them from China had already been taken based on the level of tariffs applied, Tavares said, without indicating what tariff level would trigger the switch. Leapmotor executives have decided to import the bigger C10 electric SUV despite the tariffs, due to its more expensive price tag, Jefferies said. News that Stellantis is moving fast with its plan to localise Leapmotor shows just how important this relatively unknown brand is to the multinational behemoth as it tries to increase the usability and affordability of EVs. "We're going to leverage their cost competitiveness, we're going to leverage their own technology mastering, namely in electric powertrains and everything that relates to connectivity, and we're going to leverage this to our benefit through the export company,” Tavares said at the capital markets day. The technology in Leapmotor cars potentially eclipses that offered in any Stellantis EV. Leapmotor’s Leap 3.0 architecture, for example, makes the C10 one of the few genuine ‘software-defined’ vehicles, alongside those from Tesla. Stellantis is already moving to replace some of its current technology with that of Leapmotor’s, starting with lighting and moving onto battery packs, Jefferies said. Stellantis is also looking at whether to use Leapmotor’s electric motors to replace those built by its Nidec-Stellantis joint venture, claiming that Nidec is not investing in it any more, according to Jefferies. It's also under discussion with its dealers to stock Leapmotor cars in around 200 sites across Europe, starting in September, rising to 500 over the medium term. The Chinese brand will also leverage Stellantis’s 130 aftersales parts hubs across Europe. “We're going to make sure that the consumers are never stuck with the vehicles waiting for parts coming from far away,” Tavares said back in May. Next year, Leapmotor will start selling the A12 compact SUV, as well as another compact vehicle called the A03. Following those in 2026 will be a small SUV named the T05 and another small model named T11. With the A12 already reportedly confirmed for European production, the others also look set for local assembly, given their likely lower price range. EVs assembled in Europe from kits imported from China are subject to only a 5% tariff at present, but that might change as the EU looks to impose rules that force car makers to source more parts locally. While the cells and battery raw materials are likely to continue to be sourced from China, Leapmotor could meet a potential future 40% local content requirement if the battery pack, electric drive and some interior parts are produced locally, Jefferies said. That would increase the manufacturing cost by nearly €700 per car but would still work out cheaper than importing the whole car from China at the proposed levels of tariffs.