The joint venture which makes Jeeps in China would file for bankruptcy, joint venture partners Stellantis and Guangzhou Automobile Group (GAC) reportedly said on Monday, after a long decline for the oldest foreign auto brand in the world’s largest car market.
A Reuters report noted the the move comes after Stellantis’ surprise decision in July to end the venture with GAC, only months after saying it would raise its stake to 75% from 50%.
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The news agency noted Stellantis CEO Carlos Tavares had, at the time, blamed the growing “political influence” in doing business with partners in China while GAC has said it was “deeply shocked” by Stellantis’ decision.
Stellantis had since said it would pursue an import-based business model in China and there would be no major long term impact from the break with GAC though importing would mean more tariffs.
This month Tavares said a similar strategy could be followed with Peugeot and Citroen, the other brands Stellantis sells in China, meaning it could pull completely out of manufacturing in the country, Reuters added.
The report said sales by the GAC venture, which sold the Jeep Cherokee SUV and the Compass crossover, had been in sharp decline for the past four years, plunging plunged 50% year on year in 2021 to 20,396 vehicles.
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By GlobalDataFor 2022, the JV had sold fewer than 2,000 vehicles and just one in May.
Reuters said Stellantis’ U-turn left question marks over its ability to thrive in China, where it was getting “pummelled” by international and local rivals.
“No global car company can afford not to be in the largest car market in the world,” the news agency quoted Tavares as saying in late 2020, just before completing the Fiat Chrysler-PSA merger which created Stellantis.
The report said the group was aiming for China revenue to reach EUR20bn (US$19.8bn) by 2030, or 7% of the expected total, up from the EUR3.9bn turnover in China, India and Asia Pacific combined in 2021.
Bill Russo, head of Shanghai-based consultancy Automobility, and a former Chrysler executive, told Reuters the Jeep venture had failed to keep up with changes in the Chinese market.
“It had every right to be successful in a market that embraced sport-utility vehicles,” he reportedly said. “But you can’t be running a 1980s [when the original Chinese Jeep JV began operations – ed] business model when the 21st century has arrived.”
According to Reuters, Stellantis on Monday said it had fully impaired the value of its investment in the GAC venture in its first half results, which it previously estimated at about EUR297m.
GAC, which approved the bankruptcy filing, said the venture had liabilities of almost 111% of its assets of CNY7.3bn ($1bn). The bankruptcy would not have a significant impact on its operations, the Chinese company added, according to the report.
Reuters noted Tavares this month criticised both Europe’s automotive market and Beijing’s commercial policies – in contrast with western competitors’ more cautious stance – saying Chinese automakers should be subject to the same tariffs when exporting cars to Europe as European brands face with exports to China.
Foreign automakers had been under growing pressure in China, where the market has shifted quickly to battery-electric vehicles and domestic brands have been taking market share – foreign manufacturers’ share of the world’s biggest market dropped 5.5 percentage points last year to 45.6%, according to the China Passenger Car Association.
Chee-Kiang Lim, managing director China at Detroit based consultancy Urban Science, told Reuters 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 closed the gaps with or even surpassed their foreign partners”, so “we have to expect more JVs to unwind in the coming years”, he added.
Reuters said the bankruptcy was the latest chapter in a turbulent history for the Jeep brand in China. The former American Motors Corporation (AMC) had 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 the short-lived DaimlerChrysler merger era – ed] and then Chrysler was bought by Fiat, which became Stellantis in 2021 after the merger with PSA.
Reuters noted Tesla was the only global automaker granted a waiver to produce cars in China without a joint venture.
From the Just Auto archive: FCA and BAIC talking China JV – report
