Stellantis ending China Jeep production in radical shift

Stellantis NV is halting production of Jeeps in China and ending a 12-year joint venture with GAC Group after failing to gain traction in the world’s biggest car market.

In a statement Monday, Stellantis cited a lack of progress with its plan to take a majority share of the joint venture. The move comes months after a rift between the two partners emerged and Chief Executive Officer Carlos Tavares rolled out a strategy focused on importing vehicles to the country. 

Termination of the venture, which started in 2010, will result in a non-cash impairment charge of approximately 297 million euros ($300 million) for the first half of 2022. 

Stellantis’s shares rose as much as 2.8% in early Paris trading, trimming the decline since the start of the year to about 27%.

The decision marks another step in a radical shift in Stellantis’s strategy in China, where both PSA and Fiat Chrysler were doing poorly before their merger. Tavares had made fixing the carmaker’s dismal performance a priority and in March announced an “asset-light” plan to rely on importing vehicles rather than producing locally.

On Monday, the group said it will import an electrified lineup of Jeep vehicles to experienced Chinese dealers.

Notice of the JV’s demise coincided with an announcement by Dongfeng Motor Group of the possible sale of its entire 3.16% stake in Stellantis. The investment dates back to a holding in Peugeot-maker PSA before the merger. The companies also have a venture that makes Peugeot and Citroen models in Wuhan. 

On the Jeep venture side, signs of conflict with partner GAC emerged at the start of the year after Stellantis’s plan to take control sparked pushback from the Chinese company. They had produced the Jeep Cherokee, Renegade, Compass and Grand Commander primarily for the domestic market.

In March, Tavares said Stellantis was still waiting for Chinese officials to sign off on the plan to increase the company’s stake to 75% from 50%. At the same time, he said the plan for China would be to cut production capacity and rely on imports of brands including Jeep and Maserati vehicles. 

“There is nothing wrong about having a highly profitable” business of importing completely built cars, the CEO said. “We are trying to set up a business model that carries the lessons we have learned the hard way.”