Auto Industry

Rocky road

Stellantis and GAC differ over Jeep JVs future

Cherokee w

“They were America’s greatest contribution to modern warfare,” said George Marshall, the US military’s chief of staff during the Second World War and later the author of the eponymous Marshall Plan.

General Marshall was talking about the introduction of the Jeep, that most iconic of American vehicles. The Jeep then became a highly desirable consumer brand after the war, billed as the vehicle that can “go anywhere and do anything”. However, the American companies that make them have never been able to establish enduring relationships with Chinese drivers, despite a number of efforts that were initially quite successful.

On one level, the Jeep brand has an illustrious history in China. In January 1984, American Motors Corporation (AMC) was the first car company to establish a formal joint venture in China, partnering with Beijing Automotive Works (BAW) to create Beijing Jeep. Its Cherokee model then became the second foreign brand of passenger vehicle to be manufactured in China, after Volkswagen squeezed ahead of AMC with a trial production run of the Santana in 1982 (it didn’t formally launch its own JV until later in 1984).

Assembly line workers at Beijing Jeep were extremely well paid in local terms, earning about Rmb210 ($33) a month. “That’s more than the head of a department makes at the foreign ministry,” one Chinese attendee at the opening ceremony of the plant is said to have remarked at the time.

AMC made most of its initial income by importing kits of Cherokee components from the US, which the Chinese partner used to upgrade its BJ-212 into a four-wheel drive utility vehicle for the People’s Liberation Army.

A second effort to establish the Jeep brand began in 2013, when Fiat Chrysler (FCA) included the model in its Guangzhou Automotive Group (GAC) joint venture (Chrysler had purchased AMC in 1987). This also got off to a promising start with sales of 129,000 vehicles in 2013.

By 2018 Jeep sales had reached 222,300, although this represented just a quarter of the number the company had targeted when it relaunched the brand. Sales then slid dramatically over the next few years as a flurry of newer SUV and crossover models were introduced into the Chinese marketplace, and dropped to a low of just 20,000 sold in 2021. The Jeep brand seemed to suffer from a positioning problem: stuck between the premium German marques and more competitively priced Japanese and South Korean offerings (as well as local SUVs).

Now Jeep has a new owner, courtesy of the merger of FCA and France’s Peugeot to form Stellantis in early 2021. Its management thinks that Jeep failed to get more traction in China a decade ago because local drivers weren’t ready to embrace off-road vehicles. FCA was distracted by financial problems too. Stellantis will unveil a new direction for the brand at its forthcoming 2030 Strategy Day on March 1 and it has also announced plans to lift its shareholding in its China JV with GAC from 50% to 75%. This came as unwelcome news to GAC, however, which released a statement of its own saying that it “deeply regrets” the move from Stellantis.

Some analysts believe that the repositioning still makes financial sense for GAC, though, as it will limit its losses in the JV, which have been reported in the domestic press as reaching a cumulative Rmb5 billion.

Cao He, president of Quanlian Automobile Investment Management, told 36Kr that a number of China’s domestic car companies are winding down their foreign joint ventures as their own brands become more successful. Since January, foreign automakers have also been allowed to buy out their partners, taking 100% control of their joint ventures for the first time. Dongfeng Motor is selling down a 25% stake in its Dongfeng Yueda Kia joint venture to its South Korean partner, for instance, although there is no news yet on the future of its other joint venture, Dongfeng Peugeot Citröen, which is now part of Stellantis too.

In 2021, the JV sold 100,000 vehicles, a doubling of 2020’s sales but a tiny number compared to the 3.3 million units that General Motors and VW both notched up in China last year. Stellantis has already cited the reinvigorating of its Chinese operations as a key priority. And if it is to achieve its ambitions of staying in the ranks of the world’s largest car companies, it will need to claim a bigger stake in the world’s largest automobile market. n

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