PARIS -Stellantis and Guangzhou Automobile Group will end their loss-making joint venture producing Jeep vehicles in China, the carmakers said on Monday, only four months after the European carmaker said it would raise its stake in the business.
The U-turn comes after GAC reprimanded the world’s No.4 carmaker in January for announcing plans to raise its stake to 75% from 50%, stating the two parties had not yet signed a formal agreement.
“We came to the conclusion that it was better to close the joint venture,” said a Stellantis spokesperson, adding that the carmaker could still operate in China through its dealer network.
The Chinese automaker confirmed in a statement on its website that the two companies were negotiating how to terminate the joint venture after years of losses.
With less than 1% market share, Stellantis has been looking to revamp its strategy in the Chinese auto market as part of a broader simplification of its global structure under Chief Executive Carlos Tavares.
In its 2030 business plan released in March, Stellantis said it would adopt an “asset-light” business model in the country, still aiming to increase revenue but via imports rather than domestic production.
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“The Jeep brand will continue to strengthen its product offering in China with an enhanced electrified line-up of imported vehicles,” Stellantis said.
Stellantis aims for revenue in China to reach 20 billion euros ($20.3 billion) by 2030, totalling 7% of total expected revenue – a steep jump from the 3.9 billion euros of turnover in China, India and Asia Pacific in 2021.
The GAC venture, which saw a 50% decline in sales last year, closed a plant in March, and a second joint venture with Dongfeng recently closed two due to excess capacity.
Stellantis and Dongfeng agreed last Friday on a share repurchase framework for the 3.16% of Stellantis’ share capital held by Dongfeng, enabling the China-based firm to sell some or all the shares back to Stellantis.
Stellantis’ shares in Milan and Paris were both up by just over 1% on Monday.
Automakers including BMW and Volkswagen have raised their stakes in joint ventures with Chinese partners in recent years after the country loosened regulations which previously prevented foreign automakers from owning a majority.
Stellantis will recognise a non-cash impairment of around 297 million euros ($300 million) in its first half-year results, the company said.
($1 = 0.9861 euros)
(Reporting by Tassilo Hummel, Giulio Piovaccari, Victoria Waldersee, Zoey Zhang; editing by Edmund Blair and Jason Neely)