Global car makers are starting to question their continued presence in China as once healthy sales plummet and profit margins fall amid the rise of local giants such as BYD and Geely.
China is the world's largest automotive market, with 26 million light vehicles sold last year, but tough competition and even tougher price wars have put once-dominant foreign firms on the back foot after a decade of reaping riches from the country.
Chinese car makers grew their share in their domestic market from 40% in 2015 to 57% in 2023, according to automotive analyst firm Inovev, and "it will be very difficult for non-Chinese car makers to regain lost market shares".
Some have already left. Stellantis sold its assets to its partner Dongfeng last year following aborted efforts to boost sales of its once popular Citroën and Peugeot brands there. Its Jeep joint venture with GAC went bust in 2022. And Renault pulled out of its joint venture, also with Dongfeng, in 2020.
General Motors has the biggest market share of any global car maker in China after Volkswagen, but it too has started to struggle, with its share falling from 14% in 2017 to just 7% last year.
GM’s situation has got so bad that Bank of America analyst John Murphy asked CEO Mary Barra on the company’s January financial results call whether following Stellantis out of the door “might be the best move to make”.
Barra didn’t push back, reminding Murphy that GM giant took a similarly tough decision to end its unprofitable Opel/Vauxhall operation in Europe, selling it to PSA (now part of Stellantis). “So we're not going to shy away from making tough calls or maybe calls that people wouldn't expect,” she said.
“For years, GM 'made more money than God' in China, a former executive once told me,” Michael Dunne, the head of a China-focused consultancy and a former GM executive, wrote in a recent blog post. “Today the company is grasping at straws.”
Fellow American giant Ford has it even worse in the country, with sales now so bad that the output of its partnership with Changan is now below 20% of its factory capacity, according to figures crunched by Bloomberg.
The mistake made by the Detroit three was believing that the good times were going to stay, according to Dunne.
“GM, Ford and Jeep grew convinced of two eternal truths: first, Chinese consumers would forever prefer foreign car brands over the Chinese offerings; and second, [petrol]-powered vehicles would be dominant until kingdom come,” he wrote. “As things turned out, they were wrong on both counts.”
The rise of EVs and the attraction of nimbler local players persuaded generally younger, more tech-savvy buyers to abandon the safety of the established brands.
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