Stellantis is resetting its Jeep brand plans for the Chinese market, where the company and its predecessors have struggled to make an impact.
Rather than producing Jeeps in China, the company said in a news release Monday, it will support the brand’s customers in the world’s largest automotive market with an “electrified lineup of imported Jeep vehicles and experienced Chinese dealers.”
The company said it would terminate its joint venture with China’s GAC Group, which it noted had been a money loser in recent years, and it would report a $302 million (297 million euros) non-cash impairment charge in its financial results for the first half of this year, which are scheduled to be released on July 28.
The company had said earlier this year that it would take a majority share in the joint venture, but on Monday cited a “lack of progress” in its plans. GAC Group did not respond to a Free Press request for comment. Reuters said GAC had “reprimanded” Stellantis over its announcement in January that it would boost its share of the joint venture.
The joint venture dates to 2010, well before Fiat Chrysler Automobiles merged last year with Peugeot maker PSA Group to form Stellantis.
The news does not mean Stellantis is out of China. The company also has a joint venture with Dongfeng Motor to produce Peugeot and Citroen vehicles, according to company spokesperson Fernao Silveira.
However, the announcement prompted a number of analysts to ponder what’s next for the automaker and its key Jeep brand.
Karl Brauer, executive analyst at iSeeCars.com, said that even though the joint venture hadn’t yet proven profitable, it would be difficult to see the change as a “positive long-term move.”
“China is the largest automotive market, and every global automaker has to find success in this region or risk losing ground to competitors,” Brauer said. “It’s certainly possible to build cars outside of China and import them for sale, but there are substantial financial disadvantages to that arrangement. It’s also discouraging to see a recognized and powerful global brand like Jeep struggle to achieve profitability in this joint venture.”
More:Stellantis CEO says changing economic climate will have implications for startups
More:Stellantis admits guilt to criminal conspiracy charge in diesel emissions cheating case
More:Artist Hubert Massey wants Stellantis sound barrier mural to showcase community
Michelle Krebs, executive analyst for Cox Automotive, said it’s clear that Stellantis is unhappy about things in China.
“What I will be watching for is how does Stellantis do business in China. I can’t imagine they are abandoning the world’s largest market — and largest (electric vehicle) market — forever. Perhaps they have an alternative plan in mind,” Krebs said.
But Stephanie Brinley, principal automotive analyst at IHS Markit, said the change may open other opportunities for both companies. She noted that the partnership hasn’t worked out for either to date.
“Rethinking makes more sense than to continue to pour money in there,” Brinley said, noting that the company, including as FCA, had been working for many years to try to succeed in China, where Jeep is recognized more as an off-road, “play time” vehicle than one for families.
“It’s a difficult market in a lot of ways, and they just have to keep trying until they find what their niche is,” Brinley said, noting that Stellantis sold about 122,000 vehicles in China in 2021.
Brinley also said that other automakers have made similar choices about other markets. Ford ended production in Brazil, for instance, General Motors exited Indonesia, and numerous car companies left Australia.
Decades ago, the philosophy was automakers needed to be everywhere and just figure out how to make money in those places. Now, there’s a shift to be more strategic, with companies thinking, “’OK, we haven’t had success in the way we want to have success up until now. Let’s have a rethink,’” Brinley said.
Contact Eric D. Lawrence: elawrence@freepress.com. Follow him on Twitter: @_ericdlawrence. Become a subscriber.