Bringing the Germany-based Opel brand to China is a chance at a clean slate for Stellantis NV, an automaker whose predecessors have struggled to make inroads in the world's largest automotive market.
The transatlantic mega-merger between Fiat Chrysler Automobiles NV and French rival Groupe PSA meant to create a company that could marshal the size and resources to compete in an industry undergoing its greatest transformation since the moving assembly line. But both sides are losing money with their current offerings of Citroën, DS, Fiat, Jeep and Peugeot vehicles in China — a market where Stellantis CEO Carlos Tavares says any international automaker must compete.
Promising an innovative business model, Stellantis will share more on its strategy to rightsize its business in China before the end of the year. By bringing Opel as an upscale electric-car brand to China, though, it aims to capitalize on the good reputation of German automakers and compete with the growing number of new EV brands in the largest EV market without the burden of a bad reputation.
"Rather than trying to resurrect or recuperate, Opel is a fresh sheet of paper with a new brand name that is German," said Michael Dunne, CEO of Hong Kong-based advisory firm ZoZo Go LLC and a former General Motors Co. executive. "It hasn't been diluted or tarnished by past mistakes or failures in the China market."
Opel traces its history to 1862 in Rüsselsheim near Frankfurt, first as a sewing machine and then bicycle manufacturer. It produced its first automobile in 1899, and General Motors Corp. took full control of it in 1931. After two decades of losing money on the business, GM in 2017 sold the brand and its British sibling, Vauxhall, to PSA, which turned around the mass-market brands in 18 months. It's a leader in electrification of Stellantis' 14 brands with plans to go fully electric in Europe in 2028.
"Opel's brand promise is that we democratize innovation and that we bring German engineering into the vehicles," spokesman Harald Hamprecht said in an email. "In other words: We promise high-tech for everyone. ... In order to achieve sustainable success now and in the future, Opel has developed a new vision for the future: We are young (minded), green and global."
The company hasn't shared when it will introduce Opel to China or with what models. Next year, China lifts its requirement that foreign automakers form a joint venture with Chinese partners to operate in the country, a rule that doesn't apply to EV makers already. FCA had a 50-50 partnership with GAC Group. PSA was tied up with Dongfeng Motor Corp. Opel declined to disclose if it will take advantage of those changing rules that could offer greater profitability.
"They can start from scratch and remove the failures of Peugeot, Citroën and Fiat as a brand," said Philippe Houchois, a London-based analyst for investment firm Jefferies Group LLC. "Jeep didn't quite work, but it is worth keeping because of the brand recognition. Opel is a new start. It's a German brand by perception, and being German for the Chinese car buyer gives you that different flavor."
In the first half of the year, Stellantis sold just 72,000 vehicles in China, according to forecaster LMC Automotive. The automaker says its market share declined to 0.5% from 0.6% year-over-year.
Meanwhile, among Opel's German rivals market leader Volkswagen AG delivered 1.85 million vehicles in the first half in China. BMW AG sold nearly 468,000 vehicles, and Daimler AG's Mercedes-Benz sold nearly 442,000.
It's that demand and pricing power Stellantis hopes to capture with Opel: "Germany has a reputation for solid engineering and build quality," said Sam Abuelsamid, e-mobility analyst for market research firm Guidehouse Inc. "They have the perception that they are more premium, luxury, well-built. If you have a German brand that has any kind of awareness, it's likely to rub off on you."
Of course, customers have to share that awareness. With Opel being new to the country, Abuelsamid noted, that will take some marketing work: "Yes, it's German. Nobody knows it's German. It's more likely they don't know what Opel is at all."
Still: "There's a halo over the Opel brand because it's German even though consumers may not be familiar with it," Dunne said.
But its global recognition is helpful, said Sam Fiorani, vice president of global forecasting for AutoForecast Solutions LLC. That makes it a relatively inexpensive venture compared to the numerous EV brands just getting started in China.
Finding a market position will be key. Opel is best known for its smaller cars, while SUVs represent almost half of China's sales, said Ferdinand Dudenhöffer, a professor of automotive economics with the Center for Automotive Research at the University of Duisburg-Essen in Germany. It also doesn't have the most inexpensive options, and it's not a premium brand.
"What is the positioning of the brand?" Dudenhöffer said. "If it is just being German, it is a little bit weak. In principle, it is not German. It is French," because its vehicles sit on architectures shared with Peugeot and Citroën.
Perhaps adding to the challenge of entering China, Opel CEO Michael Lohscheller is leaving to become CEO at VinFast Global, the automotive arm of Vietnamese conglomerate Vingroup. Uwe Hochgeschurtz, CEO of Renault SA in Germany, Austria and Switzerland, takes over Sept. 1.
Stellantis' failures in China, however, root deeper than merely not having a German brand. Its Detroit rivals fare better, too: General Motors sold 1.46 million vehicles in the first six months of 2021. Ford Motor Co. sold almost 307,000.
Peugeot and Jeep during the 1980s were early entrants in China, around the same time as competitors like VW. But the mindset was different, said Houchois of Jefferies in London. Going to China was seen as a promotion at VW, while it was a punishment at other brands like Peugeot. It was left with aging product and growing competition.
"The volume push — that was not part of the mindset at Peugeot," Houchois said. "It never was seen as core the way it was at Volkswagen."
When the market took a downturn, Peugeot lost market share and cut its prices, Dunne said: "Their sales didn't respond. The allure, distinctiveness, exclusivity went away. It was another average French sedan. Chinese customers can be quite unforgiving when that happens."
Jeep, meanwhile, was prime for the Chinese market with its well-regarded SUVs throughout the rest of the world. But it didn't catch on.
"I think they thought, 'We just need to put it into the market and take off by itself without adequate marketing service and all the rest,'" Dunne said. "It didn't go on autopilot."
Now the Chinese market is the world's leader in EVs, representing 37% of the market in the first half of the year. Increasingly, customers are looking for the newest in technology and connectivity that even has challenged some German automakers. VW in the second quarter reported it had sold half the number of EVs that Tesla Inc. did.
"The software and connectivity of the car, that's something that carmakers — even BMW, Mercedes and Volkswagen — were taken a bit by surprise," Houchois said.
Stellantis has said it is finalizing an agreement with Foxconn Technology Group to create a 50-50 Mobile Drive joint venture that would create the infotainment systems and cockpits of the future for Stellantis brands and other automakers. Tavares has highlighted the partnership as a part of Stellantis' developing strategy for China, including introducing Opel there.
"What we need now to do is synchronize the brand landing in China with the new business footprint we are now creating," Tavares said recently during an Automotive Press Association webinar. "The German brands' image in China is very strong. We want to enjoy the quality of the German brand image in China in the eyes of the consumer."
