China’s Dongfeng Motor Group and Stellantis they would expand their vehicle and component export business through an asset sale to better capture the burgeoning China auto market, Reuters reported.

Under the asset transfer deal, state owned Dongfeng would buy land use rights and buildings in Wuhan and Xiangyang from Dongfeng Peugeot Citroen Automobile (DPCA), the joint venture with Stellantis, for CNY1.71bn (US$233.69m).

Stellantis, meanwhile, had agreed to continue producing Peugeot and Citroen cars with Dongfeng in the Chinese factories and exporting Peugeot 4008 and 5008 models to ASEAN countries, plus the Citroen C5X to Europe, Reuters said.

A Bloomberg report added that agreement would be achieved via a 10 year leasing deal.

The move to sell the DPCA plants to Dongfeng Motor underscores Stellantis’ “asset light” strategy in China, Stellantis said in a statement cited by Reuters.

Reuters noted Stellantis, which sees its future as a niche player in China, closed its joint venture which makes Jeeps with Guangzhou Automobile Group (GAC) last year as sales of the brand slumped amid intensifying competition in the globe’s largest vehicle market.

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It said then it was considering a similar option for Peugeot and Citroen.

According to the report, citing data from China Association of Automobile Manufacturers, the DPCA JV exported 37,000 cars, all internal combustion engine vehicles, in 2022 from China, accounting for nearly 30% of its total car that year.

DPCA reportedly said it was 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 [range] as well as Fukang models,” Dongfeng said.

The acquisition would help Dongfeng consolidate its in house new energy passenger vehicle businesses, Dongfeng said in a stock exchange filing cited by Reuters.

Bloomberg noted Stellantis had struggled to gain traction in China compared to the likes of Volkswagen and BMW. Its report added CEO Carlos Tavares last year blindsided partner Dongfeng with its decision to end making Jeeps in China to switch course to that ‘asset light’ strategy which included more vehicle imports.

However, the auto giant was still interested in Chinese EV startups as an alternative having a China presence. It had considered potentially working with Chinese EV makers including Zhejiang Leapmotor Technologies., Bloomberg reported in August, citing unnamed sources.

Following in the footsteps of its rivals, Stellantis was weighing options such as investing in a local EV company, those Bloomberg sources said at the time.