(Yicai Global) March 24 -- Stellantis, the vehicle manufacturer formed in January from the mega-merger of French auto giant PSA Group and multinational corporation Fiat Chrysler Automobiles, will not give up on China despite moribund sales by its two joint ventures in the country, the company’s chief operating officer said.

Failure in China is not acceptable, Gregoire Olivier told Yicai Global at a recent event. It is not just about sales and market share, but more to do with the fact that many important innovations in the global automobile sector take place first in China. If we exited the China market, we would become less competitive on the worldwide arena, he added.

Stellantis, which encompasses 14 brands including Fiat, Maserati, Jeep, Dodge, Peugeot, Citroen and Opel, runs two JVs in China, namely Dongfeng Peugeot Citroen Automobile Company and GAC Fiat Chrysler Automobiles. Both have seen sales stall dramatically since 2017, when they were selling around 900,000 units a year. Last year Dongfeng Peugeot Citroen only shifted 43,600 autos and GAC Fiat just 40,500 yet the pair have a combined annual production capacity of 1.2 million vehicles.

As a result, 90 percent of the two firm’s finished cars from last year remain unsold. And they have run up a huge deficit of more than CNY11 billion (USD1.7 billion) over the past two and a half years, according to company data.

A special team led by Chief Executive Officer Carlos Tavares has been set up to resolve the pair’s excess capacity in China and to steer long-term growth, Olivier said. Some CNY130 million (USD20 million) of funds have been committed until 2022 to keep the pair up and running. The China action plan will be announced at the end of this year or early next year, he added.

Small Steps

In the meantime, Dongfeng Citroen has been taking active measures to dig itself out of its hole. It has started to upgrade models without hiking prices so as to be more competitive. It is offering to buy back used cars at a price that is 12 percent greater than the scrap value, without adding any conditions such as swapping a new car for an old one. It will also help customers to get loans from banks for auto purchases.

The Wuhan-based JV has seen sales grow for the last five months although sales volume remains perilously low. It shifted 7,000 autos in January but needs to sell at least 180,000 cars a year to break even.

Editors: Liao Shumin, Kim Taylor