Faced with contracting market share and overcapacity, Stellantis is reconfiguring its global strategy by leaning heavily on its historic Chinese partner, Dongfeng. The two automotive groups have announced a strategic agreement to produce new electrified vehicles in China for export. It shows how Western legacy automakers are increasingly relying on Chinese manufacturing efficiencies.
When Peugeot-Citroën sailed under the PSA name, it entered into a joint venture with Chinese manufacturer Dongfeng (DPCA) to enter the nascent market. That deal is now 34 years old. That long-lasting agreement now sees a substantial financial injection from Stellantis, the current owner of the French brands.
Together with local authorities, the group is injecting over 8 billion yuan (approximately €1 billion), with Stellantis contributing roughly €130 million.
Peugeot and Jeep
The shift is that Stellantis is no longer building in China for China but also for the export markets. Beginning in 2027, the DPCA facility in Wuhan will manufacture two new ‘new energy’ (electrified) Peugeot models. Also, the plant will produce two plug-in hybrid Jeep off-road vehicles, exclusively for international markets.
According to statements from Stellantis CEO Antonio Filosa, the objective is to merge the strengths of both entities to deploy cutting-edge electric technologies. Dongfeng Chairman Yang Qing noted that the collaboration will inject necessary momentum into the DPCA alliance, which has seen its output severely diminished in recent years amid the rapid rise of domestic Chinese competitors.
Marriage of necessity
So, the revival of this partnership comes at a critical moment for both corporations. Since its 2021 formation, Stellantis has experienced a sharp decline in its core regions. By 2025, its European market share had fallen from 22% to 16%, while its United States footprint had shrunk from 11.6% to 8.2%.
Dongfeng, a state-owned enterprise that famously acquired a 14% stake in a struggling PSA Group in 2014 (now diluted to 1.6% of Stellantis), is facing its own domestic pressures. Once commanding up to 14% of the Chinese market across all its joint ventures, Dongfeng’s proprietary brands accounted for merely 2.3% of domestic sales last year. Both companies need to revive their activities.
Also in Europe
The deepened alliance is part of a broader industrial pivot. To compete with the influx of cost-effective Chinese electric vehicles, Stellantis is aggressively pursuing partnerships to optimize its supply chain and absorb excess capacity in its European factories. The group has already announced it will halt car manufacturing in Poissy, near Paris, as of 2028.
The group is also collaborating with Leapmotor, planning to produce vehicles in its Zaragoza and Madrid plants to fill the gaps. Reportedly, an outright sale of the Madrid facility to the Leapmotor joint venture is under consideration.
And it doesn’t stop there. Unconfirmed press reports indicate that Stellantis may offer underutilized facilities to Dongfeng. Names on that list are the Citroën plant in Rennes, France, as well as sites in Italy (Cassino) and Germany.
While Stellantis has not commented on these reports, these considerations align with a wider industry trend; BYD, in the running to buy the Dresden factory from Volkswagen, and Xpeng are also actively seeking European manufacturing assets to bypass potential trade tariffs.
