Shaky start for Stellantis bid to grab bigger stake in China

MILAN – Automaker Stellantis’ moves to cement its position in fast-growing China appeared to have gotten off to a rocky start after one of its joint venture partners said it had not been consulted before announcing its intention to take a majority stake.

Stellantis, born a year ago from the merger of PSA Peugeot with Fiat Chrysler, holds less than 1% of the Chinese market share of 21 million vehicles where it inherited two joint ventures. It plans to present its strategy on March 1, but offered some clues in announcements this week.

In particular, they plan to increase the stake in Chinese partner GAC Stellantis from 50% to 75% under new rules allowing more foreign investment. In addition to that, it announced on Friday that the other joint venture partnership with Dongfeng doubled its sales last year.

The company said on Thursday that the agreement to extend its stake in GAC Stellantis had been reached with the GAC Group, but the Chinese partner replied that it had not been informed and that the release had not been agreed. The agreement is subject to the approval of the Chinese government.

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“That’s not a good sign,” said Ferdinand Dudenhoeffer of the Center for Automotive Research (CAR) in Germany. “It could mean the deal won’t go through or the Chinese want more money.”

China has gradually lifted its requirement for foreign automakers to work through joint ventures with state partners to produce cars in China. Foreigners were allowed to own 100% of electric vehicle makers in 2018. This extended to commercial vehicles in 2020 and passenger vehicles this month.

Stellantis’ decision to gain greater control over its joint ventures is particularly significant given that GAC manages other joint ventures, Dudenhoeffer said. GAC’s partnerships with Honda, Toyota and Mitsubishi have seen significantly higher sales volumes.

Despite doubling its sales through the Dongfeng Peugeot Citroën Automobile JV to more than 100,000 vehicles last year, Stellantis – the world’s fourth-largest automaker – remains far behind other foreign automakers. VW and GM each sold some 3.3 million cars in China last year, while Tesla’s smaller sales soared to some 319,000, according to CAR figures.

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Stellantis is counting on its popular Jeep SUVs, made under the GAC joint venture inherited from Fiat Chrysler, to gain traction in China. Stellantis is planning a so-called “One Jeep” strategy in China, which focuses on the Changsha plant where it is about to launch the Compass model.

Globally, China is the market to bet on, with CAR predicting sales to reach 26.7 million by 2025 and 50 million in the coming decades. Dudenhoeffer said Stellantis’ strategy remained long-term, due to its backward position and also because its brands, including Jeep, are little known in China compared to Volkswagen and GM.

“It’s important to make a big investment in China, but they have a lot of competition there. It’s not impossible, but the chance of Stellantis becoming a big player in China is very low in my opinion,” he said.

China’s easing of restrictions reflects authorities’ growing confidence in the ability of ambitious new Chinese brands to compete, particularly in electric vehicles. Chinese leaders hoped that increased competition would force their industry to grow faster and become a world leader.

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Previously, foreign brands were limited to 50% of a joint venture, a contractual arrangement under which both parties shared technology, manufacturing expenses and profits.

BMW AG in 2018 became the first foreign automaker to hold the majority of a joint venture, increasing its stake in a partnership with Brilliance Automotive Group to 75% from 50%.

The following year, Tesla Ltd. opened the first wholly foreign-owned factory in Shanghai.

Automakers, including General Motors Co., Toyota Motor Co. and Volkswagen AG, said they plan to stick with Chinese partners who bring official connections and sales and supply networks.

Daimler AG’s Mercedes brand has also launched electric vehicle projects with two private Chinese automakers, BYD Auto and Geely Holding Group.


Joe McDonald contributed from Beijing.

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