China's GAC scolds Stellantis over joint-venture plan

3 minute read

The logo of Stellantis is seen in this image provided on November 9, 2020. Communication FCA /Handout via REUTERS/File Photo

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  • Stellantis says stake in JV would increase to 75%
  • GAC says no formal agreement agreement signed
  • JV produces Jeep-branded vehicles in China
  • Stellantis to present business plan on March 1

MILAN/SHANGHAI, Jan 27 (Reuters) - Guangzhou Automobile Group (GAC) (601238.SS) on Thursday rebuked Stellantis (STLA.MI), for announcing plans to increase a stake in their joint venture without the Chinese automaker's approval.

In a statement earlier on Thursday Stellantis said it was planning to increase to 75% its stake in the joint venture with GAC, which produces Jeep-branded vehicles. Stellantis and GAC currently each hold 50% of the joint venture.

Stellantis said the deal had been agreed with its partner. GAC however said the two parties had not signed a formal agreement and criticized Stellantis for issuing the statement.

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"The way it was released was not approved by us and GAC Group deeply regrets it," GAC said in a statement.

However, GAC said the shareholders of the joint venture had carried out in-depth communication and negotiations how to revitalize its business operations, saying that the venture had in recent years encountered "great difficulties."

GAC added it would strictly abide by China's national policy and required procedures regarding foreign joint venture and cooperation matters. Stellantis said the plan remained subject to approval by the Chinese government.

A Stellantis spokesperson said the company would not comment further. China's Ministry of Commerce did not immediately respond to a request for comment.

The proposed move, for which Stellantis did not provide financial details, would be made possible by a recent change to Chinese regulation, now allowing foreign carmakers to own more than 50% in their local joint ventures starting this month, with Beijing keen for them to invest more in the country.

Other foreign automakers have tightened control of their joint ventures in China include Volkswagen (VOWG_p.DE) which secured a controlling 75% stake in a venture with China's JAC (600418.SS) in 2020.

CHINA STRATEGY

Stellantis' plan to increase its stake in its joint venture with GAC is part of an overhaul of its strategy in the world's largest auto market.

With a market share below 1%, China remains a weak spot for the world's No.4 carmaker, which was created last year through the merger of Fiat Chrysler and Peugeot-owner PSA.

Bestinver analyst Marco Opirari said an increased stake would allow Stellantis to fully consolidate Chinese operations in its accounts and be more in control of strategic decisions.

Some analysts think Stellantis could look to leverage its strong Jeep and Maserati brands there and could also consider using China as an export base for the rest of Asia, or deepen its ties with iPhone assembler Foxconn (2317.TW) beyond their current joint ventures on software and semiconductors.

"Additional details on Stellantis' plan for the Chinese market will be announced within the global strategic plan," the company said.

Stellantis said last year it would create a simplified structure to develop the Jeep brand in China.

On Thursday it said it would keep working with GAC to grow the brand in the country.

The GAC JV, which Stellantis inherited from Fiat Chrysler, said last year it would close one of its two factories in China, to partly reduce excess capacity in the country. read more

As well as the GAC partnership, Stellantis operates PSA's former joint venture in China with Dongfeng Motor Group (0489.HK), which earlier closed two plants to tackle overcapacity.

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Reporting by Agnieszka Flak, Giulio Piovaccari and Brenda Goh; additional reporting by Beijing newsroom; editing by Keith Weir and Frank Jack Daniel

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