Analysts at Bank of America believe that Detroit automakers General Motors (GM), Ford and Stellantis should abandon the fiercely competitive Chinese market “as soon as possible” and focus on the United States.
“We think from a pure profit and strategic perspective it makes sense to exit China and focus on where the money is — North American trucks,” Bank of America auto analyst John Murphy said on Tuesday. detroit news and CNBC.
General Motors made a fortune in China in the 2010s by leveraging its century-old Buick brand, which has a long history in China. At its peak, annual revenue reached $2 billion and sales reached 4 million vehicles.
But the growing strength of local rivals such as BYD and Geely means sales and profits are drying up. In 2023, General Motors’ sales in China dropped to 2.1 million vehicles, and it lost $106 million last quarter, its third loss in 15 years.
Things are even more unpleasant at Ford and the former Chrysler Group (now known as Stellantis after merging with France’s Peugeot Citroën). The two companies have so far failed to capture a sustainable and significant share of the local car market, the world’s largest with a record 30 million vehicles sold last year.
Therefore, Murphy believes that future financing losses in China will weaken the strength of the three major automakers. He added that they should leave “as soon as possible” to redeploy resources to develop an electric vehicle lineup to compete with Elon Musk’s Tesla.
“Focus on your core,” Murphy said while speaking at an event organized by the Automotive Press Association, where he presented the bank’s annual Auto Wars report. “China is no longer a core strategy for GM, Ford or Stellantis.”
wealth We reached out to all three Detroit automakers for statements but had not received comment as of press time.
If the three companies decide to withdraw from China entirely, Musk’s Tesla will become the only U.S. car brand competitive in the world’s three largest car markets, including North America and Europe.
Chinese automakers have methodically squeezed weaker Western brands, largely by hiring European car designers to build stylish cars in state-of-the-art factories staffed with low-cost labor. Many brands can now also acquire technology developed overseas through joint venture transfers or outright acquisitions of Western brands such as Volvo.
Detroit can’t catch Tesla while still funding losses in China
Chinese consumers also have high expectations for their technology – spending huge amounts of time and money on seamless apps like WeChat – and therefore expect the same from their vehicles.
In fact, the Volkswagen brand has long been the undisputed market leader in China, and one of the reasons why the ID series electric cars it sells has been disappointing compared with expectations is the perceived poor value for money. Much of this stems from its barebones infotainment system and substandard software compared to its rivals.
On the other hand, Tesla pioneered the concept of electric vehicles that can be remotely updated wirelessly, and it still remains competitive in comparison – even though its hardware, that is, the car itself, has been considered an ordinary product by Chinese consumers . . Furthermore, with the exception of General Motors’ Buick, bottom-tier brands like Ford and Chrysler have no legacy, no cache of premium, and no technology.
But the recent deflationary downturn triggered by the collapse of China’s real estate market has triggered a brutal price war that many Western automakers cannot and will not follow. It has even pushed local brands to seek their fortune in healthier export markets overseas.
Detroit’s automakers have a choice to make – do they still want to pursue global ambitions, or do they want to chip away at the huge lead that Musk’s company enjoys in the cost of making electric cars?
“This is going to be mission critical to ultimately compete with Tesla on a price and cost basis,” Murphy added. “It doesn’t make a lot of sense right now to push volume up and lose money.”
