Stellantis Makes a Small But Brilliant Bet With Jeep in China Amid $70 Billion Turnaround

Three legacy global automakers that have far more in common than not could hardly have traded any differently over the past three years. General Motors is firing on all cylinders after gaining 164%, while crosstown rival Ford Motor Company gained a modest 19%. The struggling Stellantis (NYSE: STLA) shed over 70% of its value during that time -- ouch.

That said, because of that drastic sell-off, investors have an opportunity to start a position in Stellantis cheaply, in hopes its massive $70 billion turnaround will gain traction and drive the stock far higher. A big part of Stellantis' turnaround focuses on Jeep, and there's some interesting news with the automaker's star brand.

Image source: Stellantis.

Will Jeep work in China?

Jeep's importance to Stellantis' global turnaround can't be understated. Not only is it one of the automaker's four newly designated core global brands (along with Ram, Peugeot, and Fiat), but one could argue that it's the most important. Stellantis is committing 70% of its core $70 billion turnaround plan into those core four, and now we have additional insight into Jeep investment.

Jeep is making a splash and returning to Chinese production after being absent for the past four years. Previously, Jeep's China sales imploded from a peak of about 203,000 vehicles in 2018 down to almost irrelevancy at 20,000 in 2022. Jeep's return to production in China is not the only intriguing aspect of this small but brilliant move by Stellantis. Jeep will also export vehicles globally from China for the first time.

As many investors know, China's automotive market share is roughly half new-energy vehicles (NEVs), a term that includes both full-electric vehicles (EVs) and hybrids. While that may not sound like a market traditional Jeep vehicles would thrive in, Jeep's strategy includes developing two electrified Jeep vehicles with Dongfeng Motor Group, leveraging the Chinese partner's manufacturing capabilities and advanced EV technology -- a pretty big win for Stellantis and Jeep.

The new $1.2 billion Dongfeng Stellantis Automotive Technology Co. is now poised to aid in the development of two Jeep-branded and two Peugeot-branded models. All four will be EVs and plug-in hybrids. According to Stellantis CEO Antonio Filosa, the new vehicles are going to be manufactured by Dongfeng Peugeot Citroen Automobile (DPCA) at its plant in Wuhan starting in 2027. They will then be distributed globally through Stellantis' international sales and distribution network, leveraging both companies' comparable strengths.

Why it's important

This is an excellent way for Stellantis to leverage excess capacity as a global export base in China. It also enables Jeep to tap directly into the advanced EV technology and development process that has been dubbed "China Speed." Chinese automakers can develop an entire new vehicle in roughly half the time the global industry has considered normal.

This small but brilliant move not only produces new Jeep vehicles and allows domestic sales to regrow, but also enables a new pathway for Jeep to export to multiple regions as opportunities or demand arise. Jeep is going to be a centerpiece of Stellantis' global turnaround, and this was just a prudent, profitable, and wise strategic move amid the automaker's broader $70 billion turnaround. Savvy investors would be wise to follow Stellantis' many moves, even small ones such as this.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.