One Automotive CEO Says What We All Know
He tells the truth about doing business in China and pays the price.
Thanks to the oddities of local laws, virtually every foreign automaker wishing to manufacture and sell cars in China must do so through a joint venture with a domestic automaker. Those joint partnerships don’t always go so well as clearly evidenced by the implosion of the marriage between French-Italian-American company Stellantis and Guangzhou Automobile Group or GAC. In a stunning reversal, Stellantis said it will no longer be making Jeeps specifically for the Chinese market.
Photo via Stellantis
It was just in January when GAC was angry with Stellantis for claiming the venture would no longer be 50-50, the foreign automaker claiming it would increase its stake to 75%, since the legal documents hadn’t been signed. The Chinese auto market is notoriously xenophobic and touchy, a sad fact Jaguar Land Rover learned by successfully pursuing legal options against a copycat brand only for Chinese consumers to react adversely.
Stellantis CEO Carlos Tavares, a man famous for shooting from the hip and calling things as he sees them, blew up the situation in China by commenting during a financial results meeting last week “the political influence” in Chinese business interactions has been increasing daily, as reported by Reuters. Naturally, that made the Chinese Communist Party very unhappy and when the party is unhappy, nobody is happy in China.
It gets even better: Tavares outed GAC for trying to not play above board with the legal agreement between the automakers. In other words, the CEO said what so many know about trying to conduct business in China, and that is foreigners get the short end of the stick whenever locals say so.
Photo via Stellantis
Many years ago, a business professor of mine pointed out the challenges of doing business in China at a time when many western corporations were giddy about selling their products to over a billion potential customers. My professor had us take an ethics survey, showing the results from our class and then business students across the United States. Our results were fairly similar to others, but when he revealed the answers of those ethical questions for students in China, a shocking number of them were polar opposites.
These cultural differences make operating in China far more challenging than working in South Korea, Japan, India, or many other Asian countries. Now, GAC is saying Stellantis was the one which didn’t pull its weight in the agreement between the two companies. Smartly, Stellantis’ PR team is keeping their mouths shut about what Tavares and GAC have said. After all, the French-Italian-American automaker with its headquarters in Holland still desperately wants in on the alluring Chinese automotive market.
Read the Reuters report here.