What future for Stellantis in China? While its sales aren’t taking off in the world’s largest auto market, the group resulting from the PSA-FCA merger could simply stop producing vehicles there, settling for importer status.
Reckoning with China in Paris
Negotiations are underway with local Stellantis partners, Stellantis boss Carlos Tavares said at the Paris Motor Show this week.
A show that welcomes in particular several Chinese manufacturers such as BYD or Great Wall Motors, with brands that are preparing to launch in Europe. Enough to support Carlos Tavares’ argument:
“We see that the dogmatic decisions of the European Union have laid out a red carpet in front of Chinese manufacturers, so the situation and there, we have to manage it with the spirit of competition that characterizes us”, he declared in particular about BFM business.
Indeed, Europe has registered the end of the sale of new thermal cars (also hybrids) by 2035. A decision poorly digested by Carlos Tavares, but who nevertheless says he is “ready for the race”, now wanting adjustments, such as aid that he would point out to models assembled in Europe, including batteries, like what China or the United States are doing.
Greater social risk in Europe
The head of Stellantis also mentions the necessary support for the sale of low-emission thermal cars, to ensure the transition between now and 2035, at the risk of abandoning the European market to Chinese manufacturers. Enough to allow “the middle classes to retain the freedom to move” with “maintaining the affordable size of these vehicles, between 15,000 and 20,000 euros”:
“The average age of a vehicle in circulation in Europe is 12 years and any car over 12 years old emits more than 200 grams of CO2 per kilometer. With a simple mild hybridization in a compact car, you have emissions of less than 100 grams and therefore reduce at least 50%, preserve access to new cars for the middle classes and counteract inflation”, he explained during a round table in a hurry
For him, the current situation, with electric vehicles more expensive than their thermal equivalents, encourages households to keep the car. Car soon to be banned from driving in most major cities with the establishment of EPZs and a black stage at play:
“If you don’t add this layer of pragmatism, social stability is no longer guaranteed and you will also aggravate the problem of the planet, because there will not be enough people rich enough to buy electric vehicles, he predicts before concluding on the question. whether Europe could reconsider its decision: it depends on how many people you are going to have on the street.
In China, a future more uncertain than ever
On the other side of the planet, the question of Stellantis’ presence in China clearly arises. The Franco-Italian-American group has already closed the joint venture with GAC, which produced for the Jeep brand in China, in the absence of having managed to gain a majority stake.
Now it is with Dongfeng, partner of Peugeot and Citroën, with whom talks are taking place.
After the international sanctions against Iran or Russia in recent times, Carlos Tavares no longer seems to want to carry the weight of an unstable geopolitical situation. Thus he justifies this strategy of the so-called “asset light” (light assets, that is, without local factories) for China:
“We have been expelled several times from a country when Western sanctions are imposed (…) Are we sure that the stability of relations between China and the world is guaranteed?” the tensions. between the People’s Republic and Taiwan and a situation that will remain unstable for years to come.
He continues: “If we reach the end of our strategy, we don’t need factories in China. In a world where the context is tense, we don’t need to create vulnerabilities there.”
A strategy that has been in the works for some time: in its Dare Forward 2030 plan unveiled last March, Stellantis already mentioned “this ‘asset-light’ economic model to reduce fixed costs and limit geopolitical risks” in China, saying that It was with a target of 20,000 million euros in turnover by the end of the decade. This represents less than 7% of the €300 billion Stellantis is targeting for its worldwide revenue.
Where will the third sales pillar of Stellantis be?
But while Stellantis, with its 14 brands, is positioned as the world number 3 in the sector, behind Toyota and Volkswagen, can the group really ignore China and its more than 25 million new cars sold in 2021?
“Stellantis is not really in the race for volumes, which is reflected in this desire to move away from the world’s largest market. If Volkswagen sold 3 million cars there in 2021, its market share has fallen significantly in recent years. For Toyota, the strength of its sales in Japan and Southeast Asia compensates for some weakness in its performance in China”, says an analyst specializing in the automotive sector.
“The real strong point of Stellantis is the margins, with rates above 10% in each geographical area in the first half”, he recalls, after record results recorded in the first half.
During a conference held on the sidelines of the Paris Motor Show last Tuesday, Carlos Tavares mentioned, however, the search for a third geographical area that could represent more than 25% of sales. Currently, North America accounts for nearly 50% of Stellantis sales, 36% in “extended” Europe. In the rest of the world, South America represents 8% of turnover, compared to 4% in Africa-Middle East and only 3% in Asia.
“Historically, Fiat was very powerful in South America and particularly in Brazil. But these are still extremely volatile markets. It will be difficult to make it the third pillar of Stellantis’ strategy”, predicts our expert in the sector.
For him, the game in Asia is not lost either and could be revived with the acquisition of a local manufacturer. Business to follow…
Source: BFM TV
