The joint venture between Stellantis and Chinese carmaker Guangzhou Automobile Group (GAC), will file for bankruptcy.
In an announcement on October 31, Stellantis said services to customers in China will continue. GAC has also approved the bankruptcy filing, revealing that it has liabilities of approximately 111% of its assets, or 7.3 billion yuan ($1 billion). The Chinese company expects little disturbance in operation after the filing.
The GAC-FCA joint venture sells Jeep Cherokee, SUV and the Compass crossover, with GAC in charge of making Stellantis’ Jeep vehicles inside China.
Results for the first half of 2022 showed that the Netherlands-based automaker had entirely impaired the value of its investment and other related assets in the partnership.
According to Reuters, sales for the venture have been drastically declining over the past four years. In 2021, they recorded a 50% drop year-on-year to 20,396 vehicles. In 2022, fewer than 2,000 cars were sold. It reported selling just one automobile in May.
The European carmaker in July said it would terminate the venture with GAC. The Chinese partner at the time said the joint venture had been in a state of loss and could not resume normal production and operation since February.
Pulling out of the partnership, Stellantis was planning to sell imported vehicles into China, which are subjected to tariffs. Beijing stipulates that for international automakers to operate in the Chinese market, they must pair up with a local one. By far, Tesla has been the only exception.
It has become more challenging for international carmakers to operate in China. The market has become more oriented to battery-electric vehicles, with local firms gaining more market share. Global brands took 52% of passenger car sales in the first quarter of 2022, with a 43% monthly share in April. This is a decline from the 60-70% range typically seen over the past few years.