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Stellantis to refocus China strategy with Jeep, Maserati brands

Published 11/03/2022, 03:37 AM
Updated 11/03/2022, 11:06 AM
© Reuters. FILE PHOTO: The logo of Stellantis is seen on a company's building in Velizy-Villacoublay near Paris, France, May 5, 2021. REUTERS/Gonzalo Fuentes

By Giulio Piovaccari and Gilles Guillaume

MILAN (Reuters) -Stellantis sees its future as a niche player in China though its premium brand Jeep and luxury brand Maserati, its chief financial officer said on Thursday, as the carmaker rethinks its strategy in the world's largest market.

The group said this week it was closing its joint venture that makes Jeeps in China with local partner Guangzhou Automobile Group (GAC) amid disappointing results and what CEO Carlos Tavares previously described as a growing political influence in business by Beijing.

Stellantis has said it would now focus on an "asset light", export-based strategy for Jeep in China and that it was considering a similar option for Peugeot (OTC:PUGOY) and Citroen, the other brands it makes in the country through a different local venture.

Presenting Stellantis third quarter revenue data released earlier on Thursday, CFO Richard Palmer said the group would be "somewhat of a niche player" in China, with attractive products for specific types of customer demand.

"In terms of the export model that we're looking at, clearly we need to have a very clear focus on certain parts of the Chinese market because we're not going to be a volume player," Palmer said.

CHIP CRUNCH SLOWLY EASING

Stellantis revenues rose 29% globally to 42.1 billion euros ($41.3 billion) in the third quarter, topping analyst expectations of 40.9 billion euros, according to a Reuters poll. Less than 3% of it came from the China, India and Asia Pacific region.

The company, whose other brands include Fiat and Alfa Romeo, said revenues were supported by improved semiconductor supplies, which helped it to boost sales volumes, strong pricing and favourable foreign exchange movements.

Palmer said microchip supply conditions would keep recording "sequential" improvements, though he did not expect them to be back to normal before the end of next year.

He also expects a lower impact from raw material inflation in 2023, compared to this year.

But other supply chain issues were having an impact on what is now the world's third largest carmaker by sales, with Palmer saying the industry as a whole was facing a shortage of trucks and drivers.

"These issues have impacted our ability to convert our strong order portfolio into sales in Europe," he said. "We expect obviously to resolve those going into the fourth quarter," he added.

Milan-listed shares in Stellantis were down 3.6% by 1445 GMT, underperforming the European automotive stock index.

The company also confirmed a forecast for a double-digit margin on adjusted operating profit and positive industrial free cash flow this year.

REASSURANCE ON ENERGY

Palmer said the company was currently seeing "no red light flashing" on possible energy constraints affecting its supply chain and that the level of concern was now lower compared to a few months ago, as "everyone is taking actions".

"If the winter is normal, let's say, then I think we're reasonably confident that we can manage production without any significant interruptions," Palmer said.

He conceded however that Stellantis "very extensive supply chain" could pose a risk.

© Reuters. FILE PHOTO: The logo of Stellantis is seen on a company's building in Velizy-Villacoublay near Paris, France, May 5, 2021. REUTERS/Gonzalo Fuentes

"Small hiccups in suppliers can create big complexities for us in terms of the completion of vehicles," he said.

($1 = 1.0190 euros)

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