Stellantis Implementing New Strategy in China

Stellantis — Jeep which later became Stellantis — was the U.S. automaker to build vehicles in China, starting in 1985 with the Cherokee, but the company has struggled to find its way since then. 

Stellantis Tavares at Dare Forward seated
Stellantis CEO Carlos Tavares said the company’s going to e “asset light” in China.

However, the world’s largest vehicle market has given a lift to competitors as diverse as General Motors, Volkswagen, Hyundai and Tesla and Stellantis CEO Carlos Tavares said Tuesday the company now has a plan to regain its footing in the Chinese market. 

Tavares described the plan for what he described as an “asset-light business model” to reduce fixed costs and limit exposure to “geopolitical risk” with projected revenue of $22.6 billion. The plan will be centered on one manufacturing plant operated by a joint venture between GAC Group and Stellantis.

Back to basics

Dare Forward 2030 panel
Tavares said the company will use on plant in China to build a variety of vehicles.

The plan is for Stellantis to expand its stake from 50% to 75%, which was announced in late January, assuming it’s approved, which is expected, he said.  

The JV plant in China will build multiple brands from the Stellantis portfolio. But Stellantis also will export Jeep and Maserati vehicles into the Chinese market to grow its luxury vehicle business in China, which has a strong demand for high-end vehicles. 

“China has been a problem for former PSA and former FCA. So the merger did not change the fact that something needed to be done to improve the business case of the two former companies in China,” he said. “So we are moving to fix it. That’s what we have been doing this year.”

He noted the efforts netted a “positive” result in year one, reducing its losses “by around 50 percent.” Tavares noted the company is taking the lessons learned and applying them to the new business model.

Tavares talks China strategy
The company’s cut its “red ink” significantly in the past year, Tavares noted.

New strategy took months to formulate 

The new strategy sketched out by Tavares followed months of discussions inside the company and negotiations in China with the company’s principal Chinese partner, Guangzhou Automotive Group, which drove a hard bargain even though it was keenly interested in expanding the Jeep brand in China. 

In the early 1980s, the People Republic of China opened the door to a venture with the Chrysler Corp. that built Jeeps in Beijing Jeep. Beijing Jeep became the forerunner of all the investment in China by the global auto industry, which have been critical in fashioning the world’s largest market for automotive products. 

Beijing Jeep survived the merger of Chrysler and Daimler Benz and after the companies uncoupled in 2007 it was nearly abandoned. Finally, it was taken over by Daimler AG, which was having its own problems in China at the time. Mercedes-Benz operations in China are now a successor to the original Beijing Jeep, which was one of the building blocks of the modern Chinese auto industry.

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