Stellantis was quite excited about its operations in China in January of this year. With more than 100,000 units sold, sales nearly doubled in 2021 compared to 2020, with a large portion being Jeep Wranglers, the well-liked off-road brand that enjoys consumer devotion comparable to Harley-Davidson owners.
Grgoire Olivier, chief operating officer for Stellantis China, said, “Since day one of Stellantis, we have assessed the situation with our partners and are currently finalizing our plans for China, which we regard to be a strategic market in terms of untapped potential. Before, any business wishing to produce goods in China had to collaborate with a local business. In order to get around China’s import taxes on foreign-made vehicles, GM, Volkswagen, BMW, and other automakers all established joint ventures with Chinese producers. GAC Group was selected by Stellantis as its local partner.
Utilizing the shift in the government’s stance on foreign manufacturers was a key component of the company’s ambitions for expanding its market in China. It and other businesses were now free to assume majority control over their manufacturing agreements or to move forward without a partner at all thanks to the new rules. The joint venture between Stellantis and GAC will see a 75% ownership interest grow earlier this year, according to the company. Tesla was the first—and as far as we are aware, the only—company to forge a direct path into the Chinese market and establish a totally owned local factory.
THE ROSE’S BLOOM IS OFF Therefore, it comes as a bit of a surprise that Stellantis announced just six months later that company will stop producing cars in China. The business claimed in an press release on July 18 that discussions to end the joint venture that manufactures and sells Jeep vehicles in China were started by GAC Group and Stellantis due to a lack of progress in the previously disclosed intention for Stellantis to acquire a controlling stake in their joint venture.
According to the business, it will offer imported Jeep models, including those that are electric, using an asset-light strategy. The March 2010 joint venture, which has been losing money lately, will be formally terminated with the help of GAC Group, and Stellantis plans to report a non-cash impairment charge of around 297 million in its first-half 2022 results. An improved electrified line-up of imported Jeep vehicles will be added to the brand’s product lineup in China to meet and exceed the needs of Chinese consumers.
That sounds a little too hopeful. Chinese consumers clearly favor goods created in their country. As a result of Stellantis’ decision to break its manufacturing contract with GAC, there will be a lot of animosity, which might make people less enthusiastic about Jeep products.
According to Nikkei Asia , Carlos Tavaras, CEO of Stellantis, stated last Thursday that GAC’s breach of trust was the reason for the decision to discontinue the joint venture. But it’s more complicated than that. Tavares is also concerned about the US-China relationship’s geopolitical position, particularly with reference to Taiwan. As corporate after corporation found itself being held captive by Russia, the lessons from Russia’s war on Ukraine are being felt in industries all over the world. They had very little control over how to stop their operations in Russia and leave after the invasion.
Reports in Autoblog Additionally, Tavares stated this week: Over the past few years, we have noticed an increase in political meddling in China’s business community. We don’t want to experience cross-sanctions, as has lately happened to other businesses in other parts of the world.
Each side in a divorce offers a different story, and that is true in this situation. According to Reuters , GAC has retaliated against Stellantis by claiming that Stellantis, not GAC, is to blame for the deterioration of trust between the two businesses. It claims that Stellantis broke its obligation and expresses its dismay at the criticisms made by Stellantis.
THE CONCLUSION The complicated specifics of this corporate split are unknown to us, but the political ramifications ought to make every boardroom at every firm doing business in China cringe. All bets are off if Nancy Pelosi’s visit to Taiwan prompts China to panic. The nations of the world appear set on fighting with one another at a time when we should all be working together to find a solution to a rapidly warming planet.
Tesla has made a significant wager on Chinese manufacturing. Elon Musk believes he and Xi Jinping are best friends, but Jack Ma also held this opinion. Perhaps The Marvelous Mr. Musk should read Frank Stockton’s The Lady? Or The Tiger? again. Despite being from 1882, it still has relevance today.
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