Stellantis to raise stake in China JV with GAC to 75pct

28-Jan-2022 Intellasia | Reuters | 5:02 AM Print This Post

Stellantis (STLA.MI), on Thursday revealed plans to increase a stake in its 50-50 joint venture in China with Guangzhou Automobile Group (GAC) (601238.SS), part of an overhaul of its strategy in the world’s largest auto market.

With a market share below 1%, China remains a weak spot for the world’s No.4 carmaker, which was created last year through the merger of Fiat Chrysler and Peugeot-owner PSA.

If the increased stake went ahead, Stellantis would hold 75 percent of GAC, which produces Jeep-branded vehicles, it said in a statement on Thursday, adding the deal remained subject to approval by the Chinese government.

Stellantis said the deal had been agreed with its JV partner, however GAC said the two parties had not signed a formal agreement and criticised Stellantis for issuing a statement without its approval.

A Stellantis spokesperson said the company would not comment further.

GAC said it would strictly abide by China’s national policy and required procedures regarding foreign joint venture and cooperation matters.

Stellantis did not provide financial details of the proposed deal. China’s Ministry of Commerce did not immediately respond to a request for comment.

The move was made possible by a recent change to Chinese regulation, now allowing foreign carmakers to own more than 50 percent in their local joint ventures starting this month.

Bestinver analyst Marco Opirari said an increased stake would allow Stellantis to fully book Chinese operations in its accounts and be more in control of strategic decisions.

“The acquisition of a majority stake in the Chinese JV represents a first step in the group’s new strategy in the region,” he said.

Some analysts think Stellantis could look to leverage its strong Jeep and Maserati brands there and could also consider using China as an export base for the rest of Asia, or deepen its ties with iPhone assembler Foxconn (2317.TW) beyond their current joint ventures on software and semiconductors.

“Additional details on Stellantis’ plan for the Chinese market will be announced within the global strategic plan,” the company said.

GAC said the shareholders of the joint venture had carried out in-depth communication and negotiations on the business operations of the JV and how to revitalise it, saying that the joint venture had in recent years encountered “great difficulties” in terms of its operations.

Stellantis said last year it would create a simplified structure to develop the Jeep brand in China.

On Thursday it said it would keep working with GAC to grow the brand in the country.

The GAC JV, which Stellantis inherited from Fiat Chrysler, said last year it would close one of its two factories in China, to partly reduce excess capacity in the country.

As well as the GAC partnership, Stellantis operates PSA’s former joint venture in China with Dongfeng Motor Group (0489.HK), which earlier closed two plants to tackle overcapacity.


Category: China

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