(Reuters) -China's Dongfeng Motor Group and Stellantis (NYSE:STLA) said on Thursday the automakers will expand their vehicle and component export business through an asset sale to capture the burgeoning China auto market better.
Under the asset transfer deal, state-owned Dongfeng will buy land use-rights and buildings in Wuhan and Xiangyang from Dongfeng Peugeot (OTC:PUGOY) Citroën Automobile (DPCA), its joint venture with Stellantis, for 1.71 billion yuan ($233.69 million).
Meanwhile, Stellantis has agreed to continue producing Peugeot and Citroen cars with Dongfeng in the China plants and exporting Peugeot 4008 and Peugeot 5008 models to ASEAN countries, and Citroen C5X model to Europe.
The move to sell the DPCA plants to Dongfeng Motor underscores Stellantis' "asset light" strategy in China, Stellantis said in a statement.
The carmaker, which sees its future as a niche player in China, closed its joint venture that makes Jeeps with Guangzhou Automobile Group (GAC) last year as sales of the brand slumped amid intensifying competition in the world's largest auto market.
It said then it was considering a similar option for Peugeot and Citroen.
The joint venture DPCA exported 37,000 cars, all internal combustion engine vehicles, in 2022 from China, accounting for nearly 30% of its total car sales in the year, according to data from China Association of Automobile Manufacturers.
DPCA said it is working on more projects to increase exports with support from both shareholders.
"After the acquisition, the company (Dongfeng) and Stellantis will further deepen their cooperation to support DPCA's continued production of its existing Peugeot and Citroen as well as Fukang models," Dongfeng said.
The acquisition will help Dongfeng consolidate its in-house new energy passenger vehicle businesses, Dongfeng said in a stock exchange filing. ($1 = 7.3173 Chinese yuan renminbi)