Stellantis terminates China GAC joint venture in U-turn

PARIS (Reuters) -Stellantis announced the “orderly termination” of its loss-making joint venture with Chinese carmaker GAC, which has been producing Jeep vehicles, only four months after saying it would raise its stake in the business.

The U-turn comes after GAC reprimanded the world’s No.4 carmaker in January for announcing plans to raise its stake to 75% from 50%, stating the two parties had not yet signed a formal agreement.

“We came to the conclusion that it was better to close the joint venture,” a Stellantis spokesperson, adding that the venture had been loss-making and that the carmaker could still operate in China through its dealer network.

GAC struck the partnership in 2010 with Fiat Chrysler, which later merged with PSA to form Stellantis.

GAC was not immediately available for comment.

With less than a 1% share of the Chinese auto market, Stellantis has been looking to reshuffle its strategy in the country as part of a broader simplification of its global structure under Chief Executive Carlos Tavares.

In its 2030 business plan released in March, Stellantis said it would adopt an “asset-light” business model in the country, where it also has a joint venture with China’s Dongfeng.

The GAC venture, which saw a 50% decline in sales last year, closed one plant in March and the Dongfeng venture recently closed two due to excess capacity.

Stellantis aims for revenues in China to reach 20 billion euros ($20.3 billion) by 2030, totalling 7% of total expected revenue, a steep jump from the 3.9 billion euros turned over in China, India and Asia Pacific in 2021.

Stellantis’ shares in Milan and Paris were both up by just over 1% in early Monday trading.

Automakers including BMW and Volkswagen have raised their stakes in joint ventures with Chinese partners in recent years after the country loosened regulations which previously prevented foreign automakers from owning a majority.

Stellantis said in January that its plans to raise the stake were subject to approval from China’s government.

Stellantis will recognise a non-cash impairment of around 297 million euros ($300 million) for its first half-year results, the company said.

“The Jeep brand will continue to strengthen its product offering in China with an enhanced electrified line-up of imported vehicles,” Stellantis added.

($1 = 0.9861 euros)

(Reporting by Tassilo Hummel, Giulio Piovaccari, Victoria Waldersee; Editing by Kirsten Donovan and Edmund Blair)

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