Why Stellantis pulled plug on Jeep's only China factory

Stellantis NV shuttered its only Jeep factory in China because local politicians are increasingly meddling in business in the world’s biggest new-vehicle market, CEO Carlos Tavares said Thursday.

The carmaker is implementing an “asset-light” strategy in the country because of concerns that rising political tensions could lead to sanctions in a conflict between China and the rest of the world, 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 candid comments offer an explanation for Stellantis’s announcement last week that it is pulling out of a 12-year manufacturing partnership with state-owned Guangzhou Automobile Group. The exit raises uncomfortable questions about what the future may hold for foreign manufacturers in China.

The war in Ukraine has disrupted supply chains in Europe, and the lengthening list of sanctions targeting Russia is a grim reminder of what could happen if China were to assert itself in Taiwan. Business for carmakers including Stellantis, Volkswagen Group and General Motors Co. in the country is becoming more challenging as local manufacturers including BYD Co. Li Auto Inc. and Nio Inc. are catching up fast, including with a slew of fully electric offerings.

Tavares acknowledged that the Jeep joint venture was racking up losses but said the company’s reasons for leaving run deeper.

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

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