Stellantis announced on Monday that the joint venture it has with Guangzhou Automobile Group, which produces Jeep vehicles in China, is declaring bankruptcy. This comes after a protracted decline for the oldest foreign auto brand in the biggest market in the world.

The European automaker claimed in a statement that its results for the first half of 2022 fully reflected the value of its investment in the joint venture.

According to Stellantis, Guangzhou Automobile Group Co (GAC), which had also approved the bankruptcy filing, would keep serving Jeep customers in China.

No comments from GAC was available on this matter. 

In July, Stellantis ended its partnership with Guangzhou Automobile Group Co (GAC), just months after declaring that it would increase its ownership of the company from 50% to 75%.

In the days that followed, GAC criticized Stellantis, claiming that it was “deeply shocked” by Stellantis’ criticism of the termination of their joint venture in China. View More

For the past four years, the venture’s sales, which sold the Jeep Cherokee SUV and the Compass crossover, have been drastically declining. 2021 saw a 50% decrease in sales from the prior year to 20,396 vehicles.

It sold fewer than 2,000 cars in 2022. It reported selling just one vehicle in May.

Stellantis Chief Executive Officer Carlos Tavares stated that “the political influence” in conducting business with its partners in China had increased over the previous five years when reporting financial results.

In the days that followed, GAC criticized Stellantis, claiming that it was “deeply shocked” by Stellantis’ criticism of the termination of their joint venture in China. View More

For the past four years, the venture’s sales, which sold the Jeep Cherokee SUV and the Compass crossover, have been drastically declining. 2021 saw a 50% decrease in sales from the prior year to 20,396 vehicles.

It sold fewer than 2,000 cars in 2022. It reported selling just one vehicle in May.

Stellantis Chief Executive Officer Carlos Tavares stated that “the political influence” in conducting business with its partners in China had increased over the previous five years when reporting financial results.

According to Chee-Kiang Lim, managing director China at Detroit-based consultancy Urban Science, the joint-venture model, which China had mandated as a requirement for investment by foreign automakers, is in danger.

“The joint-venture policy was originally designed to compel foreign brands to share their brands and technology with local Chinese (automakers) in exchange for access to China’s large, growing auto market,” he said.

Now that Chinese automakers are more “confident that they have closed the gaps with or even surpassed their foreign partners,” he said, “we have to expect more JVs to unwind in the coming years.”

When foreign brands made their initial investments in China, it was a virtually untapped market for international automakers. The bankruptcy of the Jeep venture is the most recent chapter in this turbulent history.

In 1984, the former AMC made an investment in a Beijing Jeep joint venture, the first such agreement for an American brand to produce cars in China.

The company underwent ownership changes after AMC was bought by Chrysler, which was then bought by Fiat, which merged with Peugeot to form Stellantis in 2021.

The only international automaker, Tesla, has been given permission to produce cars in China without forming a joint venture.

(Adapted from Latestly.com)