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Stellantis (STLA) Streamlines in China, GAC FCA to Shut Plant

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Stellantis N.V.'s (STLA - Free Report) Chinese joint venture (JV) with GAC Group, called GAC FIAT CHRYSLER Automobiles Co., Ltd. (GAC FCA), plans to shutter one of its two factories in China by next March.

The GAC FCA intends to halt work at its Guangzhou-based factory, and shift the production to the factory in Changsha, the capital of Hunan province. The de-registration of the JV's Guangzhou branch is scheduled for a March 2022 completion.

The GAC FCA was set up in 2010 as an equal-share partnership between Fiat Chrysler (FCA) and state-owned Chinese automaker GAC Group. Later, FCA merged with PSA to become Stellantis.

The GAC FCA currently runs two complete vehicle manufacturing plants, with a joint capacity of 328,000 vehicles annually. The Changsha-based factory primarily develops the Jeep Grand Commander and the Jeep Cherokee, whereas the Guangzhou plant manufactures the Jeep Renegade and the Jeep Compass.

Stellantis’ latest move to halt production in one of its factories represents the company’s restructuring operations in China, the world's biggest auto market, where it has struggled to capture a niche market. The production transfer from Guangzhou to Changsha is aimed at enhancing the utilisation rate of plants and lower costs.

Stellantis operates another JV in China with Dongfeng Motor Group, which has sold 47,788 cars between January and July this year. Both of Stellantis’ JVs are exporting China-made vehicles.

This August, Stellantis revealed it has a new strategy in pipeline for China, which will be in place by the end of the year. It also plans to roll out its Opel brand in China, offering fully electric vehicles.

Amid the intensifying competition in China, this is not the first time that a JV between international automakers and local partners has streamlined operations due to the declining sales.

Mazda Motor (MZDAY - Free Report) terminated its joint venture with FAW last month, while Hyundai Motor's partnership with BAIC sold one factory to electric vehicle maker Li Auto (LI - Free Report) .  Last year too, Renault SA (RNLSY - Free Report) closed its venture with Dongfeng less than five years after they commenced production.

Meanwhile, there are reports that the Moroccan government has signed a new partnership agreement with Stellantis, which will enable the automaker to manufacture electric cars for export at its Kenitra plant.

Reportedly, this agreement builds upon an existing agreement, which has enabled the manufacture of Peugeot 208 and Citroen Ami. The Kenitra plant will now also produce the Opel Rocks-e, an electric car recently rolled out for the German market by Opel.

Stellantis also recently announced that Christine Feuell has been appointed as the CEO of its Chrysler brand. Feuell, previously serving as the chief commercial officer at Honeywell Safety and Productivity Solutions, will assume her role in Stellantis coming Monday. Timothy Kuniskis, CEO of Stellantis's Dodge brand, has been the interim Chrysler brand CEO since January when Stellantis was formed through the merger of FCA and PSA.

Stellantis currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.