Stellantis Jeep joint venture in China to file for bankruptcy


Oct 31 (Reuters) – Joint venture that makes Jeeps in China to file for bankruptcy, Stellantis partners (STLA.MI) and Guangzhou Automobile Group (GAC) said on Monday, after a long decline for the oldest foreign auto brand in the world’s biggest auto market.

The move comes after Stellantis’ surprise decision in July to end the venture with GAC, just months after announcing it would increase its stake to 75% from 50%.

Stellantis CEO Carlos Tavares at the time blamed growing “political influence” in business dealings with partners in China, while GAC said it was “deeply shocked” by Stellantis’ decision.

Stellantis has since stated that it will continue an import-based business model in China and that there will be no major long-term impact from the breakup with GAC. (601238.SS).

Importing means more customs duties.

Tavares added this month that a similar strategy could be followed with Peugeot and Citroen, the other brands Stellantis sells in China, meaning it could pull out of manufacturing in the country altogether.

Sales at GAC, which sold the Jeep Cherokee SUV and the Compass crossover, have fallen sharply over the past four years. They plunged 50% in 2021 from the previous year to 20,396 vehicles.

For 2022, it has sold less than 2,000 vehicles, and in May it said it sold only one vehicle.

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U-TURN

Stellantis’ U-turn leaves question marks over its ability to thrive in China, where it is being pummeled by international and local rivals.

“No global automaker can afford not to be in the biggest auto market in the world,” Tavares said in late 2020, just before he finalized the merger between Fiat Chrysler and PSA that created Stellantis.

The group is targeting revenue in China to reach 20 billion euros ($19.8 billion) by 2030, or 7% of the projected total – a jump from the 3.9 billion euros figure business in China, India and Asia-Pacific in 2021.

Bill Russo, director of Shanghai-based consultancy Automobility Ltd and a former Chrysler executive, said the Jeep business has failed to keep up with changes in the Chinese market.

“He had every right to succeed in a market that welcomed sport utility vehicles,” he said. “But you can’t run a business model from the 1980s when the 21st century has arrived.”

Stellantis said on Monday it had fully written down the value of its investment in the GAC business in its first-half results, which it had previously estimated at around 297 million euros.

GAC, which approved the bankruptcy filing, said the company had liabilities of nearly 111% of its assets of 7.3 billion yuan ($1 billion). Bankruptcy would not significantly impact its operations, the Chinese company added.

CRITICAL

Criticizing both the European auto market and Beijing’s trade policies – in contrast to a more cautious stance of Western rivals – Tavares said this month that Chinese automakers should face the same tariffs when exporting cars to Europe than the European brands that export to China.

Foreign automakers are under increasing pressure in China, where the market has rapidly shifted towards battery-electric vehicles and domestic brands have taken market share.

Share of foreign manufacturers in the Chinese car market fell 5.5 percentage points last year to 45.6%according to the China Passenger Car Association.

Chee-Kiang Lim, managing director China of Detroit-based consultancy Urban Science, said the joint venture model – which China had insisted on to ensure foreign brands shared technology with local automakers – was under threat.

Chinese automakers are more “confident that they have bridged the gaps with their overseas partners, if not surpassed,” so “we should expect more joint ventures to unravel in the coming years,” he said. declared.

The bankruptcy is the latest chapter in a turbulent history for the Jeep brand in China.

The former AMC invested in a Beijing Jeep joint venture in 1984, the first such deal for vehicle production in China by an American brand. It then went through ownership changes after AMC was acquired by Chrysler, then Chrysler was acquired by Fiat, which became Stellantis in 2021 after the merger with PSA.

You’re here (TSLA.O) is the only global automaker to have been granted a waiver to produce cars in China without a joint venture.

($1 = 7.2660 Chinese Yuan)

Reporting by Juby Babu in Bengaluru, Zhang Yan in Shanghai and Norihiko Shirouzu in Beijing, Giulio Piovaccari in Milan; Written by Kevin Krolicki and Giulio Piovaccari; Editing by Edmund Klamann and Mark Potter

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