For My Society

All About News

America got the world driving. Now it’s passing baton to China

Files China Eu Trade Tariff Ev 0 1729759713706 1731980570189.jpg

The relentless export of American cars and car culture put the world on the road in the 20th century. By the 1960s, Ford Motor Co. had plants in almost every major European country, as well as Argentina, Brazil, Egypt, India, Israel, Peru, Pakistan, South Africa, Turkey, and Zimbabwe.

Right now, it’s passing that baton to China with barely a fight. The US car industry that emerges will be smaller, less influential—and, eventually, less profitable and financially sustainable.

The immediate question is over the fate of General Motors Co.’s Chinese units, mostly joint ventures with SAIC Motor Corp. That company, controlled by Shanghai’s city government, is best known internationally for reviving the storied British MG brand with a range of affordable, export-oriented SUVs and hatchbacks.

It’s no secret that these ventures are struggling. A decade ago, equity-accounted income from China made upmore than half of GM’s net profit, but in the first nine months of this year, they racked up a $347 million loss. “It’s a difficult market right now,” Chief Executive Officer Mary Barra told investors in July. “Very few people are making money.”

Chevrolet sales have fallen off a cliff, and are likely to end the year barely scraping 10% of the level they were at in 2019. Cadillac isn’t doing much better. Even Buick—which in China has substantial brand cachet as the chosen marque of independence leader Sun Yat-Sen and Mao’s longtimepremier Zhou Enlai—is barely keeping its head above water. Things are better with local brand Wuling, whose tinyelectric vehicles cost about $8,000, but Baojun, GM’s other local JV model, also appears to be circling the drain.

Barra has long reaffirmed her commitment to China, but the outlook has rarely looked bleaker. GM and SAIC are locked in meetings through the end of the year to restructure their holdings to make them profitable.

That looks like a tough ask.Given the way sales are collapsing, turning the situation around is going to require substantial investment to refresh the model lineup, something neither side has shown much willingness to do for a business that’s long been self-sustaining. SAIC has its own problems fighting off domestic competitors, so seems unlikely to play the role of Uncle Moneybags. BYD Co., Great Wall Motor Co. and Seres Group Co., maker of Huawei’s AITO car brand, have already overtaken its market capitalization. Others aren’t far behind.

Prospects of synergy and cooperation on innovation between the China and US businesses have also never been worse. Chinese-made cars or components that transmit data have been banned from the US market under rules introduced by President Joe Biden in September. His successor Donald Trump has mooted60%tariffs on Chinese imports, and retaliation from Beijing is likely to focus on US-made cars, still one of the biggest trade flows in the opposite direction. Even as it electrifies, GM’s core North American business of hulking SUVs and pickups is also just very different from Wuling’s locally successful range of microcars, minivans and small delivery trucks.

Many of GM’s other moves suggest it’s already looking past existing JVs.It’s focusing increasingly on exportingUS-made cars to Chinavia the Durant Guild, a so-called “lifestyle platform” targeting the sort of rich customers who might not even care about the extra cost. from a Trump-era retaliatory tariff.

In September, it signed an agreement with Hyundai Motor Co. to explore the co-development of cleaner cars and source battery materials. That’sprecisely the sort of deal you’d strike if you were worried your existing arrangements with the world’s biggest producer of clean cars and batteries —China — were hitting the rocks.

It’s not a foregone conclusion that GM will quitthe world’s largest car market, but it would be in keeping with Barra’s similarly dramatic decisions to exitEurope and India in 2017. Such a move wouldlargely be welcomed by the investors who’ve driven shares to about double their level when rumors of a retreat from China started to circulate a year ago.

A middle path would be to follow Ford and Chrysler-owner Stellantis NV, and re-establish the business as one where the Chinese company manufactures cars, and the foreignpartner exports them to lower-cost markets such as Southeast Asia and Latin America. SAIC, however, is already working hard building its own international distribution networks. It’s recently started sponsoring English soccer club Arsenal, as well as leading clubsin the French and Saudi Arabian soccer leagues, and an Australian rugby league team.Besides, turning GM into a glorified car dealership hardly looks like a route to sustainable profits.

Either option, moreover, will mark another nail in the coffin of American soft power. When Detroit had its last brush with death in 2009, about two-thirds of GM and Ford’s combined sales were outside the US. With China sales dwindling, we’re approaching the point where two-thirds will be in the US, instead. The American car industry is turning inward again for the first time in a century. Detroit got the world on the road.BYDwill inherit the earth.

Get insights into Upcoming Cars In India, Electric Vehicles, Upcoming Bikes in India and cutting-edge technology transforming the automotive landscape.

First Published Date: 19 Nov 2024, 07:14 AM IST

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *