Jeep Shutters China Plant, Citing Political Meddling

Increased meddling by local politicians prompted Stellantis NV to close its only Jeep factory in China, according to Chief Executive Officer Carlos Tavares, reported Bloomberg online news service.

Jeep is exiting as more established foreign auto brands have struggled to maintain their share of the market, raising questions about its long-term future in China. The world’s largest car market is as Chinese carmakers, including BYD Co, Greely Automobile Holdings Ltd., and Nio Inc., increase production and sales of fully electric models, according to Bloomberg.

Stellantis is implementing an “asset-light” strategy in the country out of concern that rising political tensions between China and the rest of the world could lead to economic sanctions, the CEO said in an interview with Bloomberg Television.

“We have been seeing over the last few years more and more political interference in the world of business in China,” Tavares said. “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.”

The CEO’s comments offer a deeper explanation than initially given the recent announcement that Stellantis is terminating a 12-year manufacturing partnership with state-owned Guangzhou Automobile Group.

Carmakers are considering the impact of the war in Ukraine and whether the growing list of sanctions targeting Russia would similarly apply to China if the country were to assert itself in Taiwan, Bloomberg reported.

Tavares pointed to German and U.S.-branded vehicle sales falling by about a fifth in China during the first half of 2022 and the double-digit drop for Japanese brands as domestic companies’ sales rose.

“We see that for Western players, selling cars in China is becoming increasingly difficult,” he told reporters at a press conference, according to Bloomberg. “There is an absolutely major shift in the Chinese market.”

“We have two big competitors, Volkswagen and GM, who are very present in China,” Tavares added. “I wouldn’t want to be in their place.”

Sanctions against Iran, and more recently Russia, illustrate how companies were forced to choose between two sides, Tavares said. Peugeot maker PSA Group pulled back from Iran during his tenure as CEO in 2018. This year, Renault SA was recently forced to withdraw from Russia – previously its second-biggest market – due to the war in Ukraine.

Tavares acknowledged the Jeep joint venture was experiencing losses but said the company’s reasons for leaving are more complex. The decision was rooted in “broken trust” with its local partner, as well as the Chinese Communist Party and its economic policies supporting domestic auto companies, said Tavares.

While Stellantis had signed a deal to raise its stake in the GAC joint venture to 75%, GAC “did not do what it was supposed to do,” Tavares said. “So, we considered that it was better to unwind,” said the Bloomberg report.

The venture had produced the Jeep Cherokee, Renegade, Compass and Grand Commander models primarily for the China market. Stellantis will instead ship an electrified lineup of different Jeep vehicles to its dealers in the country.

The automaker is reassessing the impact of the change on targets for China, Tavares said. Its plan has been to reach about €20 billion of annual sales and launch some 30 products by the end of the decade.