Chinese state-owned automaker Hongqi is in discussions with Stellantis over the possibility of manufacturing vehicles at one of the European group's facilities in Spain, Reuters reported.

The negotiations are being conducted via Leapmotor, the Chinese electric vehicle manufacturer in which both Stellantis and FAW – Hongqi's parent company – hold equity stakes.

Such an arrangement would enable Hongqi to sidestep the considerable capital outlay involved in building a dedicated European factory, which could amount to hundreds of millions of dollars.

Sources indicated that Hongqi models would be assembled at Stellantis's plant in Zaragoza – the same facility where Leapmotor production is due to commence later this year.

The Spanish site is also at the centre of separate advanced talks between Stellantis and Leapmotor to jointly develop an Opel-badged electric SUV using Leapmotor's technology, also earmarked for Zaragoza.

The discussions are ongoing and there is no certainty that they will result in a formal agreement.

Historically known as China's prestige state limousine marque, Hongqi has set a target of one million annual vehicle sales globally by 2030, with overseas markets accounting for at least 10% of that figure.

The brand has outlined plans to introduce 15 electric and hybrid models across 25 European markets by 2028, with the EHS5 compact electric SUV among the models intended for that push.

A supply agreement struck last year between Leapmotor and Hongqi will see Leapmotor provide an EV platform to support Hongqi's international ambitions.

If the Spanish plan goes ahead, it would mark Hongqi’s first manufacturing base in Western Europe.

Separately, sources noted that FAW has examined Hong Kong as a potential alternative production base, on the basis that exports from the territory would be subject to lower tariffs than goods shipped from mainland China.

No decision on that option has been reached.

Hongqi is one of several Chinese automakers – including state-owned groups Changan and Dongfeng – pursuing expansion beyond China's borders as competition in the domestic market intensifies.