Months after announcing plans to terminate its Jeep joint venture in China with GAC Group, the Stellantis JV has officially filed for bankruptcy. Following the approval by GAC, Stellantis’ Jeep production overseas will cease, putting an end to a joint venture that began in 2010.
Stellantis ($STLA) is a top-ten global automotive manufacturer that is currently riding record earnings in the first half of 2022 including YOY growth of BEV sales over 50%. Very little of that success comes from Stellantis’ Jeep presence in China however. In 2010, FCA (the precursor to Stellantis) signed a joint venture with Chinese manufacturer GAC Group to produce its vehicles for their local markets overseas, including Jeeps.
Despite teaming up with GAC Group, a top-five automotive manufacturer in China, Stellantis’ Jeep joint venture has struggled in recent years. Volume fell to just over 20,000 total vehicles in 2021 – a 50% drop compared to a year prior. Anemic numbers like these inevitably led to Stellantis announcing that it was terminating its JV with GAC Group this past July, thus halting Chinese Jeep production:
Due to a lack of progress in the previously announced plan for Stellantis to take a majority share of the GAC-Stellantis joint venture, Stellantis N.V. today announced its plan to focus on distributing imported vehicles for the Jeep brand in China to leverage the potential of the brand and its iconic products through an asset-light approach.
Lack of sales is one glaring issue, but we soon learned that wasn’t the only event that led the JV to bankruptcy. This past January, Stellantis had tried to raise its stake in the joint venture from 50% to 75%, only to be thwarted by GAC.
Stellantis CEO Carlos Tavares acknowledged the decreasing amount of Jeep sales in the China market as reasoning for the JV termination, but also said the decision was rooted in “broken trust” with GAC Group, simultaneously blaming Chinese policy that favors local auto brands.
GAC Group quickly fired back, calling Tavares’ comments “unbelievable,” and blamed the Jeep’s failure overseas on Stellantis’ lack of respect for Chinese customers. At that time, it was quite clear that this Jeep joint venture could not be salvaged, which has led to its official funeral following a bankruptcy filing.
GAC approves Stellantis Jeep JV bankruptcy filing
According to a statement issued by Stellantis today, its Jeep joint venture has officially filed for bankruptcy, complete with with the approval from its partner in GAC Group. Per the release:
The shareholders of the GAC-FCA Joint Venture, Guangzhou Automobile Group Co., Ltd. and Stellantis N.V., have approved a resolution authorizing the Joint Venture to file for bankruptcy, in a loss-making context. Stellantis fully impaired the value of its investment in the GAC-FCA JV and other related assets in its first half 2022 financial results. Stellantis will continue providing quality services to existing and future Jeep brand customers in China.
GAC Group says the joint venture had liabilities of almost 111% of its assets equating to 7.3 billion yuan ($1 billion). Furthermore, GAC shared in a stock exchange filing that the JV bankruptcy will not have a significant impact on its operations.
We touched upon the dwindled sales for 2021 above, but through a report by Automotive New Europe, we learned that the Chinese joint venture sold fewer than 2,000 vehicles in 2022 before the termination announcement. In May alone, it reported selling one a single vehicle.
Meanwhile, Stellantis looks to quickly move on from this failed venture and focus on the success it is finding in other global markets.