Written by | Li Yimeng
Edit | Routing Agency
For Stellantis, history may be as much of a "legacy" as the multinational corporation.
As a result, while other major automakers continue to expand their investments in China, stellantis Group has unexpectedly chosen to reduce its footprint in the world's largest automotive market.
Since January 2021, stellantis Group, a brand new company formed by the merger of PSA Group and Fiat Chrysler Automobiles (FCA), holds the rich legacy of both companies.
For example, 14 car brands, including Peugeot, Citroën, Jeep and Maserati, and their extensive product lines.
In the past year, the company has also fully demonstrated its strength to the outside world.
With 6.14 million new vehicles sold worldwide, the Stellantis Group is the world's fifth-largest automaker in 2021 with 6.14 million new vehicles sold worldwide. Ranked second only to Toyota Motor Corporation (10.5 million units), Volkswagen Group (8.9 million units), Renault-Nissan-Mitsubishi Alliance (7.68 million units) and Hyundai Motor Company (6.67 million units).
In terms of sales, the Stellantis Group is currently the world's fourth-largest automaker. According to the latest financial report, in 2021, the group achieved net revenue of 152 billion euros (about 1,063.1 billion yuan).
At the same time, strong financial performance has also played an excellent role in supporting investor confidence.
In 2021, the group achieved a net profit of 13.4 billion euros (about 93.709 billion yuan), about three times that of 2020, and a profit margin of 11.8%.
With regard to the future, the Group also painted as much of a beautiful picture as possible.
In early March, Stellantis Group told investors that it expected double-digit profit margins again in 2022. Last year, the estimate was 6.9 percent.
In addition, the group plans to achieve net zero carbon emissions from 2038 and double net income to 300 billion euros by 2030.
The "cost killer" wields a knife to the Chinese business
However, such a spirited "young" enterprise, when dealing with China's problems, is full of old age and no morale.
At a strategy briefing earlier this month, Carlos Tavares, CEO of Stellantis Group, came up with a long-term plan called Dare Forward 2030.
However, at the 128-minute conference, the Chinese market was less than 10 minutes to elaborate.
For the four stLA electric drive platforms and Opel brands that have long been expected in the Chinese market, Stellantis has not given or determined or specific introduction plans.
In its place is a business model that Tang Weishi calls "asset-light."
The Stellantis Group's goal is clear, and they hope that through this new model, they will have a "two-pronged" effect on their business in China.
On the one hand, the group will expand the scale of its imported car business in the local market, rather than increasing the production of domestic vehicles, thereby promoting the profitable growth of its brands.
Stellantis Group, on the other hand, hopes to use the "asset-light" model to continuously reduce the fixed costs of its operations in China. This will help the group achieve net revenue of €20 billion (approximately RMB139.989 billion) and an adjusted operating margin of more than 8% in China by 2030.
"China has been a long-standing problem for PSA Group and Fiat Chrysler Automobiles in the past, and the merger has not changed that fact." "We need to take some steps to improve the business situation of these two companies in China, and this is also a problem that we need to start to solve," Tang said. ”
As early as the PSA Group's tenure, Tang Weishi was proficient in cost control, so he was called "a cost killer who always smiled" by the group's trade union cadres.
For Tang Weishi, extending the cost butcher knife to the business in China may have its last resort.
"Although The Stellantis Group generated excellent new car sales performance in the Atlantic Rim markets, including North America and Europe, and although China is the world's largest automotive market, the Stellantis Group has to face a harsh reality." Liu Rui, an independent automotive analyst at the University of Engineering and Technology (UTT) in France, said.
Currently, Stellantis Group brands account for only about 0.5% of the market share in China.
Last year, China, India and Asia Pacific contributed only 11.1% to Stellantis Group's profits.
Liu Rui also pointed out that the Stellantis Group's demand for funds in the process of its electrification transformation has made it feel pressured.
In December, Mr. Tang said governments and investors alike wanted automakers to accelerate the transition to electric vehicles, but the cost burden "exceeded the limits that the auto industry could afford."
The Stellantis Group is planning to launch pure electric pickups for the Ram brand
He believes that the shift to electrification will increase the cost of automakers by 50% compared to the manufacture of traditional vehicles.
However, it is difficult for automakers to pass on these additional costs to the end consumer, because most consumers in the middle class will be "unable to afford it".
"Of course, automakers can set higher prices for their products and proactively reduce car production and sales, or accept lower profit margins. But all of these methods can lead to layoffs. Tang Weishi said.
By 2025, Stellantis plans to invest more than €30 billion to help fully electrify its product line. As part of the plan, the group will build four new STLA EV manufacturing platforms.
Stellantis Group develops the STLA electric vehicle platform
While the above reasons seem to explain The Stellantis' retreating posture in the Chinese market, they do not seem to be able to convince its investors.
In fact, since the group's inception, investors have been unhappy with its lower-than-expected chinese market participation.
"We can't stay away from this world's largest market. In fact, any international automaker must compete in China. In an interview last year, Tang Weishi made a commitment to investors.
As a result, when Stellantis' latest strategy deviated from its previous commitments, the group's share prices on the New York, Milan and Paris stock exchanges all fell in the following week.
In early March, Stellantis' share prices on all three major stock exchanges fell
How should two estates be inherited?
Right now, a series of complex issues lie in front of the Stellantis Group.
How to deal with two joint ventures in China inherited from PSA Group and FCA? And, how can we help them quickly restore product sales and profits?
Since 1992, PSA Group and Dongfeng Motor Group have established DPCA automobile company, which is responsible for the production of Peugeot and Citroen brand cars.
FCA has established a 13-year cooperation with GAC Group to jointly produce Jeep and Fiat brand products. After Fiat's exit from the Chinese market, GAC FCA is currently focusing on the manufacture of Jeep models.
Although, at the beginning of this year, Stellantis Group used the word "better" to summarize its performance in China in 2021, the next step is to divert more attention from the above two joint ventures.
Cutting excess manufacturing capacity will be the first step for the Stellantis Group.
Previously, DPCA and GAC FCA had cut production capacity for a while. Last year, both joint ventures had plant utilization rates below 20 percent.
"If Stellantis is to meet its goal of reducing fixed costs and increasing profit margins to more than 8 percent, they will have to cut more capacity or significantly increase new car sales." Liu Rui said.
Due to the decline in new car sales and intensified market competition, two of the three factories in Wuhan are idle.
Still, the two plants that DPCA is still operating in Wuhan and Chengdu can still add up to 660,000 units per year.
Two of DPCA's three plants in Wuhan have been closed
In 2021, the cumulative annual sales of DPCA automobiles were only 100,567 units. Although it is up 100.07% year-on-year from 50,267 units in 2020, it is still far behind other major competitors.
"Judging from the sales structure of DPCA, the company still has the problem of over-reliance on a single model." Yang Yifei, an automotive analyst at Yingdi Business Consulting, said.
In 2021, only two models of DPCA will sell more than 10,000 units. Among them, the cumulative sales of Dongfeng Citroen Versailles C5X models in the whole year were 12,140 units, and the annual sales of Tianyi C5 AIRCROSS were 10,607 units.
In 2021, the Versailles C5X became the best-selling model under the PSA umbrella
This also means that the annual sales of the remaining two models of Dongfeng Citroen and the five models of dongfeng Peugeot series are less than 10,000 units.
"We're not going to let unusable excess capacity burden the business model because our sales and marketing capabilities in China don't allow that to happen." Tang Weishi said.
The same strategic plan will be implemented on GAC FCA.
In the third quarter of last year, GAC FCA announced the closure of a plant in Guangzhou. In the future, new vehicle production will be concentrated at the Changsha plant to improve the plant's capacity utilization.
The company's Plant in Changsha currently produces up to 164,000 vehicles and 488,000 engines per year.
However, in the first half of last year, the joint venture's capacity utilization rate plummeted from 64% to 12%, and by the end of the year, it had further reduced to 9.95% (16,300 units).
Gac Motor Group's recent february 2022 production and sales report has further highlighted the problem of overcapacity of GAC FCA.
In February this year, GAC FCA sold 134 vehicles, down 94.64% year-on-year. In the same period, the output was only 35 vehicles, which is equivalent to producing only one car a day, and the capacity utilization rate was less than 1%.
In 2021, the total sales of GAC FCA's four Jeep models - Liberty Man, Guide, Grand Commander (including PHEV models) and Liberty Light - fell from a peak of 202,700 units in 2017 to 20,123 units.
The fierce competition in The competition in China's SUV market is considered to be the main reason for the plunge in GAC FCA's sales.
In 2015, GAC FCA began to produce free light, free man and guide, at that time, the chinese market demand for SUV models is still strong.
But almost every car brand, both in China and overseas, has expanded their lineup in the SUV segment. Competition has also heated up rapidly.
Because of this, when the Jeep brand launched a domestic commander in the Chinese market in 2018, it did not play an expected role in supporting GAC FCA's sales.
Jeep's domestic commander did not play the role of a pillar of sales
To make matters worse, GAC Group's financial report reveals a more difficult dilemma for GAC FCA to get out of.
Since 2017, the company's annual revenue has fallen by 80 percent to 6.3 billion yuan in 2020.
According to the 2021 semi-annual report, GAC FCA has total assets of 10.339 billion yuan and total liabilities of 11.778 billion yuan, which is insolvent.
Make more money with less investment?
During the Shanghai Auto Show last April, Grégoire Olivier, the newly appointed Stellantis Group Global Executive Committee member and chief operating officer for China, said the group had set up a special research group of five top management members for its China business, led by Tang Weishi himself.
After nearly a year of discussion, the final solution that the research team came up with seemed too simplistic.
"In the case of drastically reducing the production capacity of domestic vehicles, if it is necessary to maintain or increase operating income, Stellantis can only increase the scale of imported car business." Yang Yifei said.
In fact, the expansion plan for the import business also appears as a core element of Stellantis' recently announced strategy in China.
According to the latest plan of the Stellantis Group, the import scale of the Jeep brand will be doubled. In this case, the domestic business that keeps GAC FCA's profits low does not have much commercial value.
"We will focus on the Stellantis Group's iconic luxury and ultra-luxury brands, which will be part of our renewed focus on imports." Commenting on china's strategy, Tang Weishi recently said, "The profits of the import car business are still considerable, and this is true for both the Jeep and Maserati brands. ”
Sales data show that although sales of domestic Jeep models have shrunk in the past few years, the attractiveness of imported models for off-road vehicle enthusiasts remains.
In the Chinese market, sales of imported Jeep models such as the Wrangler and grand Cherokee remain healthy.
Especially the Wrangler models. Last year, sales of the model in China were described by the Stellantis Group as "the best sales performance of the year".
Last year, imported Jeep Wranglers achieved their best performance in China in the past
At the strategy conference, Tang Weishi also focused on the ultra-luxury brand Maserati.
The brand sold 7,747 imported cars in Greater China last year. As a result, China has become the brand's second largest market after the United States.
"There's nothing wrong with valuing the highly profitable Vehicle Import (CBU) business, even though it may not be as large as the local assembly (CKD) business in terms of sales scale." He said.
Profitability appears to have been used by the Stellantis Group as the sole measure of the value of business in China.
This can also be seen in the group's planned increase in GAC FCA shares.
At a strategy briefing in early March, Stellantis Group reiterated to the global media its plan to "increase its share ratio in GAC FCA from 50% to 75%".
In fact, as early as the end of January this year, stellantis Group announced the above plan through its official website.
On January 27, Stellantis Group announced on its official website its plan to increase its stake in GAC FCA
This practice caused displeasure from its Chinese partner, GAC Group. The latter immediately issued a statement saying, "This release is not approved by our side, and GUANGZHOU AUTOMOBILE Group deeply regrets it."
At present, Stellantis said that it has reached an agreement with GAC Group on the above plan, but the transaction still needs to wait for approval from Chinese regulators.
In January, the Chinese government officially lifted restrictions on overseas companies' investment in passenger car manufacturing.
Since China opened up its auto manufacturing sector to foreign investment in the 1980s, this latest move has also increased the momentum of overseas automakers seeking control in joint ventures.
Last month, for example, the BMW Group increased its stake in BMW Brilliance, its joint venture in China, from 50 percent to 75 percent.
Currently, BMW is expanding a plant in northern China and plans to build another one to meet growing local demand.
This year, BMW Brilliance's new plant in Shenyang Tiexi and BMW Brilliance's Dadong plant upgrade project will be completed. Beam Auto, a 50:50-share joint venture between BMW Group and Great Wall Motors, will also build a new plant in Zhangjiagang this year.
"Stellantis Group has repeatedly publicly spoken out about the increase in gac and FCA shares, reflecting the group's urgent attitude to promote this matter." Analyst Liu Rui said.
He believes that if Stellantis Group can successfully increase its stake in GAC FCA, it will help to be more decisive in dealing with the Jeep brand in China.
According to Tang Weishi's "One Jeep" strategy, Stellantis Group will control the sales and marketing of new cars for the Jeep brand in the Chinese market, including imported and domestic vehicle business.
Liu Rui believes that the goal of the Stellantis Group is to have a joint venture controlled by the group in China.
"In the future, the proportion of imported cars in Jeep brand sales in China will increase significantly. This makes the trade environment between the United States and China particularly important. Liu Rui said.
Achieving a higher shareholding ratio in a joint venture will help the Stellantis Group to freely adjust the import/domestic ratio of its products when necessary to reduce the cross-border trade risks arising from the volatile U.S.-China relationship.
On the other hand, the more lucrative benefits can achieve a greater degree of feedback on its global electrification transformation.
The Stellantis Group's latest fiat panda and fiat 500 hybrid models
"From this perspective, Stellantis Group is planning to make more money in China with lighter capital appropriation." Liu Rui analyzed.
At the same time, the group has also been working hard to reach a similar deal with Dongfeng and said it is seeking to restructure DPCA.
Mr. Tang did not provide details of the restructuring, but said he was trying to establish a new business model with Dongfeng Motor Group.
According to the plan, the Stellantis Group will be responsible for the marketing of the Peugeot brand and the sale of new cars in the future, while Citroën's similar business will be controlled by Dongfeng. At the same time, the manufacturing center of the joint venture will be open to third parties.
This also seems to suggest that "the shareholding ratio of Stellantis Group and Dongfeng Motor Group in DPCA will remain unchanged at 50:50".
"For the Stellantis Group, such an ownership structure must not be its ultimate goal." Liu Rui said, "The 50:50 shareholding structure means that any major decision must be discussed and jointly approved by both shareholders, which will inevitably drag down the group's operational efficiency in China and the progress of turning losses into profits." ”
At present, stellantis group is still negotiating a new business plan with Dongfeng and has not yet reached a binding agreement.
Can electric Opel be a strong needle?
For the Stellantis Group, which is in a sluggish state in the Chinese market, the Opel brand may be expected to play a role in the "strong needle".
At the Stellantis Group Electric Vehicle Day held last July, Opel CEO Michael Lohscheller revealed that "we will return to China and bring 100% Opel electric vehicles"
At the "Dare Forward 2030" strategy conference in March this year, stellantis Group did not elaborate on this, but did discuss the possibility of "introducing Opel as a pure electric brand to China".
Stellantis Group believes that this initiative can effectively leverage the popularity of German brands in China and help them profit.
"It's not so much a brand trying to revive it as it is a blank piece of paper with the name of a German car brand on it." Michael Dunne, CEO of Hong Kong-based consultancy ZoZo Go LLC, said: "The reputation of the Opel brand has not been diluted or tarnished by the mistakes or failures made in the Chinese market in the past. ”
In 1993, the Opel brand entered the Chinese market, but the perennial loss caused Opel's development in China was not smooth. The sharing of platforms with GM's sibling brands Buick and Chevrolet has also made the Opel brand from Germany criticized for its "unclear positioning".
After entering the Chinese market, Opel once launched Insoya, Astra GTC, Safili and other models, but the response was flat
In 2015, Opel, with dismal sales, withdrew from the Chinese market.
But the lower presence may have provided an opportunity for Opel's comeback – not many Chinese consumers are really familiar with the brand.
"Opel can start from scratch and eliminate the negative impact of the commercial failures of Peugeot, Citroën and Fiat," said Philippe Houchois, an analyst at Jeffrey Investments in London. ”
In 2021, among Opel's German competitors, the Volkswagen Group delivered 3.3 million new vehicles in China. The BMW Group sold 846,200 new cars, while Daimler's Mercedes-Benz brand sold nearly 760,000 new cars.
This is exactly the demand and premium capacity that the Stellantis Group hopes to gain through Opel.
"German brands have a reputation for reliable engineering and manufacturing quality," said Sam Abuelsamid, an electric vehicle analyst at guidehouse Inc, a market research firm. ”
Of course, Opel must make Chinese customers feel this awareness.
Abersamid pointed out that because Opel is a new brand for most Chinese consumers. This means that some marketing work may be required.
"Yes, it's a German brand. But no one knows it's a German brand. More likely, they simply don't know what Opel is. He said.
But the global recognition of the Opel brand may have helped somewhat in its trip to China.
Sam Fiorani, vice president of global forecasting at AutoForecast Solutions LLC, believes that broad brand recognition will make Opel's venture relatively easy compared to the many EV brands that are just starting out in China.
Finding the right market positioning will be key. Ferdinand Dudenhoeffer, a professor of automotive economics at the Automotive Research Center at the University of Duisburg-Essen in Germany, said the Opel brand is known for its small cars. But in the Chinese market, SUV models account for almost half of total sales.
"It's neither the cheapest option nor an upscale car brand." Dudenhof said. "What is the positioning of the Opel brand? If you just describe it as a German brand, it's obviously a bit weak. ”
But fundamentally, Opel is not a German brand, but a French brand. Because its vehicles share architecture with French brands such as Peugeot and Citroën.
At the same time, Opel also has other risks that can lead to failure.
ZoZo Go consulting firm reminds that Local Chinese brands already occupy a leading position in the electric vehicle market. Driven by these brands, sales of pure electric and plug-in hybrid vehicles in China increased by 254% year-on-year last year.
In China, more and more customers are looking for the latest electric and connected technologies, which poses a challenge for some traditional German automakers.
Opel's pure electric concept car looks quite futuristic
"Chinese consumers are early adopters of Tesla and software and Connected Car technology. In many ways, the case of Chinese consumers is ahead of the development of the global automotive industry, and they are interested in the development of global automotive technology. Hojos said.
He said the Chinese market's demands on software and connectivity for cars have come as a surprise to established automakers — even BMW, Mercedes-Benz and Volkswagen.
If Opel re-enters the Chinese market, one possible scenario is that it will first implant fragments of electrification and intelligent interconnection in the genes of brands and products.
Write at the end:
Looking back at the past, the dismal operation of the predecessors of the Stellantis Group in the Chinese market, and the current rather timid retreat, it is regrettable.
In the eyes of many, stellantis, a brand new company formed by the merger of PSA Group and FCA, could have developed a more ambitious China strategy.
However, in the face of the considerable inheritance and the same multiple burdens inherited from the two major enterprises, especially in the face of the current complicated situation of competition in the Chinese auto market and the many opportunities that are still possible, Tang Weishi, who has always been shrewd, has adopted a set of "asset-light" business plans that are not so sexy but may be effective to deal with the next stage of "China's gambling".
They include:
First, cut local excess capacity and turn attention to the more profitable imported car business;
Second, actively increase the stake in joint ventures in China to increase the right to speak about local operations;
Third, explore the possibility and feasibility of introducing Opel as a pure electric brand to China;
At the same time, in the face of complex and changeable public health issues and the international situation, the Stellantis Group's "solid foundation" thinking may also become another "trail"?
However, to verify the effectiveness of the "Dare Forward 2030" strategy, especially the victory or defeat of this "Chinese gamble", I am afraid that it will not be until 2030 – or at least until the moment when the Opel brand re-enters the Chinese market.
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