As Jeep shuts shop in China, Stellantis calls for asset-light strategy

The announcement of breaking off the 50:50 joint venture with GAC which mainly assembled the Jeep vehicles has been around for a week. The partnership that lasted for more than a decade approaches a dead-end considering the tough luck in the Chinese market.

As Jeep shuts shop in China, Stellantis calls for asset-light strategy
The announcement of breaking off the 50:50 joint venture with GAC which mainly assembled the Jeep vehicles has been around for a week.

Carlos Tavares, CEO, Stellantis on July 28th during the online briefing of the company’s H1 results talked about the new strategy. The automaker by dumping factories and relying more on imports will turn over a leaf as he said to go “asset light”. 

This comes after the intensified political tension between the West and China. Tavares, for that matter, has been at odds with the company’s decision of ending the joint venture in China for the deceit by partner GAC. No clear mention as to which agreement has been allegedly trespassed, the CEO, anyhow indicated a binding memorandum of understanding was not taken seriously by the partner. 

GAC in the context, of eventually accepting Stellantis’ approach has agreed to dissolve the Fiat-backed venture that started back in March 2010 after rounds of negotiation between the companies. 

The announcement of breaking off the 50:50 joint venture with GAC which mainly assembled the Jeep vehicles has been around for a week. The partnership that lasted for more than a decade approaches a dead-end considering the tough luck in the Chinese market. 

Back in January this year, Stellantis mentioned an agreement with GAC that would increase the company’s stake to 75 per cent, taking the majority of the operational control. However, no development in the same was noted thereafter despite the disposition of both companies to together pump fresh capital of about $440 million (Rs 3,494 crore) into the business.  

The total liabilities of the joint venture as of June end stood at 648.81 million yuan ($96.24 million / Rs 764.29 crore) pretax loss. The JV recorded only 1,861 units of car sales and produced 822 cars for H1 2022. As far as loans are concerned, the total figure stands at 1.162 billion yuan ($172.3 million / Rs 1,369 crore) as GAC’s loans to the venture.

For the moment, Tavares has been apprising its industry competitors not to bet too much on China owing to the ongoing geopolitical tensions. 

Stellantis is struggling to extract profits from its China business and cautioning its industry peers, meanwhile, the rivals like Volkswagen Group continue to generate profits despite the strict covid policies in Beijing and the global component shortages. 

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