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PARIS/MILAN, May 20 (Reuters) - Stellantis STLAM.MI and China's Dongfeng 600006.SS plan to form a joint venture in Europe, including potential production in France, the companies said on Wednesday, offering another glimpse into the French-Italian automaker's longer-term strategy.

The two groups signed a preliminary agreement that will cover sales and distribution, manufacturing, purchasing and engineering activities focused on Dongfeng's new energy vehicles. The JV will be owned 51% by Stellantis and 49% by Dongfeng.

Stellantis already has a joint venture with its other Chinese partner, Leapmotor 9863.HK, the scope of which is set to expand beyond distribution into manufacturing, with plans to jointly build two models in Spain and possibly later transfer ownership of a Stellantis factory in the country to the JV.

ADDRESSING LOW CAPACITY UTILISATION IN EUROPE

At its capital markets day on Thursday, Stellantis CEO Antonio Filosa is expected to tell investors how the company plans to regain market share and sales in its main U.S. market.

In the meantime, the two Chinese JVs will help the Jeep-to-Peugeot maker fill underutilised capacity at its European factories.

Stellantis on Tuesday also announced plans to begin manufacturing stripped-down, cost-efficient small e-cars in Italy.

Dongfeng is a relative newcomer to Europe and only sells cars in a handful of markets, including Italy and Poland.

But the state-owned Chinese carmaker has global ambitions, targeting annual sales of at least four million vehicles by 2030, with more than 40% from outside China.

Deals such as the one announced on Wednesday in turn help Chinese automakers quickly expand overseas and avoid European Union tariffs on EVs, at a time when they are facing a brutal price war in their domestic market.

SHARED PRODUCTION IN RENNES, FRANCE

The JV with Stellantis will seek to sell Dongfeng's premium Voyah-branded NEVs in some European markets, the two companies said, confirming a report by Reuters. It builds on a deal announced last week under which Dongfeng will make Jeep and Peugeot brand cars in China.

As part of the agreement, the partners plan to explore local production of Dongfeng models at Stellantis' Rennes plant in France, in compliance with European Union requirements.

Dongfeng still owns a stake of just over 1% in Stellantis, having been a longtime investor and partner with Peugeot maker PSA, which in 2021 merged with Fiat Chrysler to form Stellantis.