The Changsha Intermediate People’s Court has declared GAC-FCA (GAC Fiat Chrysler Automobiles), a joint venture between China’s GAC Group (Guangzhou Automobile Group) and Stellantis, bankrupt. This ruling, issued on July 8, concludes a liquidation process that began nearly three years ago.

GAC-FCA was established in 2010 in Changsha and initially thrived by localizing Jeep vehicles. It achieved peak sales of over 205,000 units in 2017. However, the company faced setbacks due to quality issues, notably a “burning oil” defect in Jeep models, which harmed its reputation. By 2021, annual sales had dropped to just over 20,000 units, with production nearly ceasing by early 2022.

Financial difficulties worsened the venture’s decline. By September 2022, GAC-FCA’s liabilities reached $1.1 billion, exceeding its assets of $1.01 billion. Attempts to stabilize the company with financial support from GAC Group and Stellantis were insufficient.

Internal conflicts contributed to the company’s challenges. In early 2022, Stellantis sought to increase its stake in the venture, a proposal opposed by GAC Group. This disagreement complicated decision-making and destabilized the partnership.

Moreover, GAC-FCA struggled to adapt to market changes, particularly in the EV segment. While domestic manufacturers like BYD and Nio advanced in the EV market, GAC-FCA failed to introduce competitive products.

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🔗 Source: Securities Times

🧠 Food for thought

1️⃣ China’s dramatic EV transition outpaced traditional joint ventures

GAC-FCA’s failure represents a broader structural shift in China’s automotive landscape that has caught many traditional manufacturers off guard.

The joint venture’s collapse coincided with China’s rapid transition to new energy vehicles (NEVs), which now represent over 41% of the country’s total vehicle sales, with passenger NEVs reaching a 49% market share 1.

This market shift occurred while GAC-FCA remained focused on traditional internal combustion engine models like the Jeep Cherokee and Renegade, missing the crucial window for electrification.

By 2023, China was producing nearly 9 million NEVs annually, approximately two-thirds of global NEV production, creating an environment where companies without strong electric offerings struggled to remain relevant 2.

The contrast between GAC-FCA’s trajectory and domestic manufacturers is stark: while the joint venture’s sales plummeted from 205,000 units to just 20,000 between 2017 and 2021, companies like BYD were rapidly expanding, selling 1.26 million NEVs in just the first five months of 2025 1.

This pattern of traditional joint ventures failing to adapt quickly enough to China’s electrification push has been repeated across the industry, with other notable exits including Changan Suzuki and Dongfeng Renault.

2️⃣ Jeep’s recurring struggle in China reveals deeper strategic challenges

The GAC-FCA bankruptcy marks Jeep’s second major retreat from China, highlighting persistent challenges in establishing a sustainable foothold in this market despite multiple attempts.

Jeep’s first China venture began in 1985 through Beijing Jeep but was abandoned in 2009 due to poor performance, demonstrating a historical pattern of difficulty adapting to Chinese market dynamics 3.

When FCA and GAC launched their joint venture in 2015 with a $755 million investment in the Changsha facility, they aimed for an annual capacity of 200,000 vehicles—a target they briefly achieved before quality issues derailed their momentum 4.

Despite CEO Sergio Marchionne acknowledging Jeep’s late entry into the Chinese market in 2015, the brand still failed to establish the necessary agility to respond to rapidly changing consumer preferences and technological shifts 4.

The recurring challenges suggest fundamental misalignments between Jeep’s global strategy and the unique demands of Chinese consumers, who increasingly favor domestic brands that offer more competitive pricing, technology integration, and electric options.

This pattern of Western automotive brands struggling to maintain relevance in China continues, with even Tesla seeing its market share decline to 4.6% amid increasing pressure from local competitors 1.

3️⃣ China’s automotive joint ventures face a fundamental evolution

GAC-FCA’s bankruptcy reflects a systemic transformation in China’s automotive industry, as the original joint venture model that dominated for decades is increasingly obsolete.

The joint venture structure was formalized in 1994 when foreign automakers were required to partner with Chinese firms and limited to 50% ownership—a policy specifically designed to protect and develop the domestic industry 2.

This regulatory framework succeeded in its long-term objective: by 2022, Chinese domestic brands controlled over 60% of the market, with the top five NEV manufacturers alone holding 61% market share 1.

The policy shift beginning in 2018 to phase out foreign ownership restrictions came as domestic brands had already established dominance, particularly in the critical NEV segment that now drives market growth 2.

GAC-FCA’s collapse demonstrates how the power dynamics within joint ventures have fundamentally shifted, with Chinese partners now often possessing superior market knowledge, technology, and consumer relationships compared to their foreign counterparts.

The changing landscape has forced traditional automotive giants to reconsider their approach to China, with companies like Stellantis choosing to exit failed joint ventures rather than continue investing in outdated business models 5.

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