By Gilles Guillaume and Giulio Piovaccari
(Reuters) -Stellantis NV is nearing a deal to acquire a stake in electric vehicle company Zhejiang Leapmotor (HK:9863), a source close to the matter said on Wednesday, and the car maker said it would give an important update on Thursday.
Earlier on Wednesday, Bloomberg reported that Stellantis (NYSE:STLA) was close to agreeing the purchase of a stake of roughly 20% in Leapmotor.
Stellantis and Leapmotor are also discussing setting up a joint venture as part of the transaction, the Bloomberg report said, adding that a partnership could allow Stellantis to manufacture and sell some Leapmotor cars outside China.
The partnership would give Stellantis access to the EV maker's parts and certain technologies, Bloomberg said.
Stellantis, whose brands include Fiat and Peugeot (OTC:PUGOY), has only a very small presence in China, the world's largest auto market. The group and rivals such as Renault (EPA:RENA) are concerned about growing competition from cheap Chinese electric cars in Europe.
In a statement, Stellantis said it had previously announced it was "studying scenarios to seize business opportunities linked to the dynamics of Chinese manufacturers in the context of the electrification of the global automobile market". It did not elaborate.
On Wednesday, the company sent out an invitation to journalists for Thursday morning for an "important update," without giving details.
Leapmotor, which has a market value of around 42 billion Hong Kong dollars ($5.4 billion), declined to comment. Its shares have gained some 22% this year.
Stellantis is due to publish its third-quarter revenue figures next Tuesday.
The group said a year ago it was closing its joint venture that makes Jeeps in China with local partner Guangzhou Automobile Group amid disappointing results.
Leapmotor said last week its gross margin in the third quarter had turned positive, the first time for the startup even though the industry has been suffering a price war this year.
It is a goal the company has been striving for this year, mainly to improve its valuation with a view to a further fundraising, a person with direct knowledge of the matter said.
($1 = 7.8215 Hong Kong dollars)