THE joint venture between Stellantis (formerly FCA) and Guangzhou Automobile Group – which makes Jeeps for the Chinese market – will file for bankruptcy.
As reported by GoAuto in JulyThe “orderly termination” of the joint venture means bankruptcy is a possible option for China’s oldest foreign brand, which has pledged to continue to support service for Chinese customers.
In a statement, Stellantis said: “The shareholders of the GAC-FCA Joint Venture, Guangzhou Automobile Group and Stellantis, have passed a resolution allowing the Joint Venture to file for bankruptcy, amid losses.
“Stellantis completely undermined the investment in the GAC-FCA Joint Venture and other related assets in the first half of 2022 financial results. Stellantis will continue to provide quality services to its clients. current and future products of the Jeep brand in China. “
GAC, which approved the bankruptcy filing, said the joint venture has liabilities of nearly 111% of its total assets of 7.3 billion yen ($A1.56 billion), but bankruptcy will not significantly affect its performance.
The Chinese venture partner criticized Stellantis, saying it was “severely shocked” by the comments regarding the closing of the business.
However, with sales of the Jeep Cherokee and Compass SUV plummeting over the past four years – and the joint venture has only sold 2,000 vehicles so far this year – the announcement was probably inevitable.
In May of this year, Jeep sold only one in China.
“The joint venture has every right to succeed in a market that accepts sport utility vehicles,” said Bill Russo, former Chrysler chief executive officer and founder and CEO of Automotive, Bill Russo.
“But you can’t run the business model of the 1980s when the 21st Century has arrived.”
In July, Stellantis CEO Carlos Tavares said the “political influence” of doing business in China had increased significantly over the past five years and he did not see any major long-term effects from termination of the joint venture with GAC.
Earlier this month, Mr. Tavares took aim at Chinese manufacturers saying they were subject to the same tariffs when exporting cars to Europe as European brands when exporting to China.
Currently, Chinese manufacturers have to pay a 10% tariff to import cars into the EU while a tax of 15 to 25% is levied on European-made cars imported into China.
“Very simply, we should ask the European Union to enforce the same conditions in Europe for Chinese manufacturers that we, Western manufacturers, compete in,” Mr. Tavares said. China.
“The European market is wide open to the Chinese, and we don’t know if their strategy is to grab market share at a loss and raise prices afterwards.”
Foreign manufacturers are coming under increasing pressure in China, where the market has rapidly shifted to battery electric vehicles and where domestic brands are capturing market share.
According to the China Tourist Vehicle Association, foreign automakers have seen their share in the Chinese market, now the largest in the world, drop by 5.5 percentage points last year, down to 45.6%, according to the China Passenger Car Association.
According to Urban Science chief executive Chee-Kiang Lim, the joint venture model that China has claimed is a condition of investment by foreign manufacturers, is under threat.
“The joint venture policy was originally designed to force foreign brands to share their brands and technologies with domestic Chinese manufacturers (manufacturers) in exchange for access to the auto market. China’s vast development,” he said.
“Now that Chinese automakers are more confident that they have closed the gap with or even surpassed their foreign counterparts, we must expect more groundbreaking joint ventures in the coming years. next year.”
Tesla is the only global automaker exempt from making cars in China without a joint venture.
