Stellantis NV, a 50:50 merger between Fiat Chrysler Automobiles and the French PSA Group, announced that its Jeep brand will be exiting the China market. A recent report quoted Chief Executive Officer Carlos Tavares saying that the only Jeep factory in China was being shut because local politicians are increasingly meddling in the business. Tavares was speaking on an interview with Bloomberg Television. The rather candid statement emerges amidst rising conflict situations between China and other parts of the world.
In the interview, Carlos Tavares said, “We have been seeing over the last few years more and more political interference in the world of business in China. We don’t want to be a victim of cross-sanctions as has been the case for other companies in other regions of the world recently.”
In the light of the rising geopolitical complications, Stellantis is adopting an “asset-light” strategy in China, should the West declare sanctions against the People’s Republic. For those who don’t know, tensions between Taiwan and China have escalated in recent weeks with a Ukraine-Russia like situation feared.
Jeep’s exit marked the end of a 12-year-old partnership with the state-owned Guangzhou Automobile Group in the world’s largest automobile market. The exit also raises questions as to what strategy will other foreign automakers may follow in China.
The global auto sector is already struggling with supply-chain constraints due to the Ukraine-Russia war. This has resulted in rising costs of raw materials, which have affected vehicle prices. It’s also partly due to the extensive list of sanctions against Russia, who invaded Ukraine earlier this year. If China chooses to do something similar with Taiwan, a similar situation could erupt against the former. With China controlling an extensive supply of components for the auto sector, this won’t be a business-friendly proposition.
Jeep locally produced SUVs like the Cherokee, Renegade, Compass and Grand Commander models, all of which were sold in China. Tavares said that the Jeep joint venture was racking up losses but its reasons to leave China are deeper. Tavares said GAC “did not do what it was supposed to do. So we considered that it was better to unwind.” Stellantis will now look at exporting models to China instead, particularly the brand’s new electrified lineup that will be sold through the brand’s existing dealer network.