Jeep Quietly Leaves Huge Market

The emblematic brand of 4×4 has just filed for bankruptcy in one of the most important automobile markets.

It is an adventure that ends in total anonymity. 

Jeep, the iconic all-terrain brand in the automotive industry, has just quietly left one of the most important automotive markets: China.

The Asian giant is the biggest automobile market in the world in competition with the United States. Automotive brands and manufacturers with global ambitions therefore cannot do without this market.

But growing tensions between Washington and Beijing have made the business climate even more difficult for Western companies in China. In the past, to enter the Chinese market, foreign car manufacturers were forced to join forces with a local group by creating a joint venture.

With the exception of Tesla  (TSLA) – Get Tesla Inc. Report, almost all Western automakers have complied with this requirement from the Chinese authorities, a sine qua non condition to take advantage of the juicy market.


Jeep Is Bankrupt

This has allowed the Chinese automotive industry to benefit from an important know-how to the point that we have witnessed the emergence of formidable Chinese vehicle manufacturers. Today, the Chinese BYD is for example the main competitor of Tesla in the segment of electric vehicles. Indeed, the group is the only car manufacturer to be able to produce more than a million clean vehicles this year apart from Tesla.

The deterioration of relations between Beijing and Washington is pushing Western groups to rethink their operations in China. 

The zero covid policy in place in China is also a huge headache for multinational supply chains.

Stellantis  (STLA) – Get Stellantis N.V. Report, the parent company of Jeep and Chrysler, thinks that’s a lot. The firm will therefore withdraw Jeep from China to put an end to all these challenges which have turned into big problems. In a press release, Stellantis explains that the joint venture formed with the Chinese company Guandgzhou has filed for bankruptcy. 

GAC-FCA, was the name of this company that produced and delivered Jeep vehicles in the country.

“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 said.

It added that: “Stellantis fully impaired the value of its investment in the GAC-FCA JV and other related assets in its first half 2022 financial results.”

Going forward, the firm will continue providing services to existing and future Jeep customers in the country.

A Troubled Relationship

The move reflects the slow decline of the brand in the world’s largest car market and Stellantis’ new strategy in China. It is in line with Chief Executive Officer Carlos Tavares’ wish to resize the company in this market, where he considers the operating conditions to be increasingly difficult for Western firms.

GAC, which approved the filing for bankruptcy, said the JV had financial liabilities representing nearly 111% of its 7.3 billion yuan ($1 billion) assets.

Stellantis had ended the joint venture in July, just months after announcing its intention to increase its stake in it from 50% to 75%.

The two partners had each attributed to the other the fault for this failure. Tavares accused GAC of having broken the relationship of trust between the two groups while GAC said it was “deeply shocked” by these remarks.

Stellantis does not rule out generalizing an “asset light” model in China, replacing the manufacture of cars in factories held in JV or in its own name by subcontracting or import contracts.

The car manufacturer will import Jeep models for its Chinese dealers as it already does for Maserati and Alfa Romeo.

Stellantis was born from the merger between French Peugeot PSA and the Italian-American Fiat Chrysler, or FCA Automobiles.

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