American Automakers Losing Footing in China's Wonky Market

Matt Posky
by Matt Posky

Last week, we looked at how the world’s largest automotive markets are coping. If you’re interested in an abridged version, they could all be doing better. We also noted that China was getting around to summarizing its summer sales data. Well, that ship has since come in, and it was full of corpses. The country has endured three straight months of falling car sales after years of consistent growth.

As the world’s largest automotive market, China impacts just about every other industrialized nation on the planet. Unfortunately, the China Association of Automobile Manufacturers (CAAM) reported that influence helped the market share of U.S. brands fall to 10.7 percent in the first eight months of 2018 versus 12.2 percent just one year earlier. The association’s assistant secretary general, Xu Haidong, said this decline could be attributed to American firms inability to refresh their lineups in a timely manner and definitely had nothing to do with the trade war, anti-American sentiments, or the boycotting of U.S. brands by Chinese consumers.

We don’t live in China, so we’ll have to take Xu’s word for it. However, Bloomberg reports that higher retaliatory tariffs imposed by China on American-made cars have caused pricing uncertainty, leading to anxiety among prospective customers.

In July, China lowered duties on all imported vehicles from 25 percent to 15 percent, after promising to finally ease up on some of its protectionist policies. But the country followed that up by increasing tariffs on all cars built in the U.S. to 40 percent, leaving those models with a severe handicap. Ford promised not to elevate prices in Asia to cope with the new fee, only to be criticized by Xu for not having the freshest of lineups.

The automaker reported a 36 percent drop in Chinese sales in August as demand fell for locally assembled vehicles. Ford has cited numerous problems this year, including lackluster dealer profitability and excess stocking of certain models. It’s fighting to hold onto its share of the market, but appears to be losing the war. However, sales of Ford-branded imported vehicles rose by 15 percent, assisted by increased demand for the F-150 Raptor and the Mustang.

Meanwhile, General Motors and its government-mandated joint ventures delivered 858,344 vehicles in China for the second quarter of 2018. Sales grew 0.7 percent from a year earlier. While an overall improvement, it still represents a slowed growth rate for the region. Cadillac and Baojun brands still achieved record deliveries for the second quarter and Chevrolet continued to post double-digit growth, though GM is aware the market is slowing down.

In that respect, China is no different than any other high-volume region, but there are some aspects that set it apart. The yuan hasn’t performed well this year and the Shanghai Stock Exchange dipped 18 percent since the start of 2018. China is also experiencing a sudden, mysterious decline in SUV demand.

According to CAMM, July’s SUV sales contracted 8.4 percent from a year earlier to 633,000 deliveries. Sedan sales shrank 1.2 percent to 815,000. August was only slightly better for China, with SUVs shrinking just 4.7 percent vs the previous year. Meanwhile, gasoline-electric hybrids and pure EVs have both seen ludicrous amounts of growth in China — despite being only a small fraction of the overall market.

Why is this important? The vast majority of American auto exports into China for 2018 were utility vehicles. The BMW X5 and Mercedes-Benz GLE (assembled in South Carolina and Alabama, respectively) are the most prolific examples. But almost everything that ships into China with any meaningful volume qualifies as an SUV or crossover.

“Winter is coming,” said Cui Dongshu, secretary general of the China Passenger Car Association. “Demand for SUVs may continue to slide through the year.”

[Image: Ford Motor Co.]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Peter Gazis Peter Gazis on Sep 12, 2018

    nivinen I saw a Japanese car broken down on the side of the road the other day. Do you think designing cheaper cars for the Chineese market is linked to the drop in reliability of Japanese vehicles sold in the U.S.A.

    • Nvinen Nvinen on Sep 12, 2018

      There are some Japanese cars which seem to be designed specifically for the Chinese market but for the most part, they look like the same cars we get, but maybe only with the smaller engines. Most Japanese cars for the Chinese market would be built in China. I doubt that any changes they make for those cars would affect vehicles built outside of China. Most cars globally already have lots of Chinese-made components anyway (especially electronics). So no, I doubt that has anything to do with it. The last modern vehicle I saw broken down was a Range Rover. Can't say I was surprised...

  • Bd2 Bd2 on Sep 12, 2018

    One would have to be really naive to think that Beijing wasn't behind some of the drop in the sale of US brands. The Japanese first experienced the brunt of the wrath of Beijing and then the Koreans.

    • Lorenzo Lorenzo on Sep 13, 2018

      That's bad news for GM as well as the Japanese and Koreans. If the Chinese did it before, they can do it again. There's no shortage of issues that can come up with the Japanese and Koreans, and cause another squeeze, and the Tariff war does no favors for GM. The Chinese don't seem to realize Trump holds the high cards in a trade situation where China needs it's $500 billion in exports to the US more than the US needs its $100 billion in exports to China. The Chinese are continuing the tit-for-tat tariff raising when they should be seeking a deal. That's what Trump's tariff ploy is all about, forcing other countries to renegotiate deals. The Chinese need to save face is running up against Trump's need to win on trade.

  • Bkojote Allright, actual person who knows trucks here, the article gets it a bit wrong.First off, the Maverick is not at all comparable to a Tacoma just because they're both Hybrids. Or lemme be blunt, the butch-est non-hybrid Maverick Tremor is suitable for 2/10 difficulty trails, a Trailhunter is for about 5/10 or maybe 6/10, just about the upper end of any stock vehicle you're buying from the factory. Aside from a Sasquatch Bronco or Rubicon Jeep Wrangler you're looking at something you're towing back if you want more capability (or perhaps something you /wish/ you were towing back.)Now, where the real world difference should play out is on the trail, where a lot of low speed crawling usually saps efficiency, especially when loaded to the gills. Real world MPG from a 4Runner is about 12-13mpg, So if this loaded-with-overlander-catalog Trailhunter is still pulling in the 20's - or even 18-19, that's a massive improvement.
  • Lou_BC "That’s expensive for a midsize pickup" All of the "offroad" midsize trucks fall in that 65k USD range. The ZR2 is probably the cheapest ( without Bison option).
  • Lou_BC There are a few in my town. They come out on sunny days. I'd rather spend $29k on a square body Chevy
  • Lou_BC I had a 2010 Ford F150 and 2010 Toyota Sienna. The F150 went through 3 sets of brakes and Sienna 2 sets. Similar mileage and 10 year span.4 sets tires on F150. Truck needed a set of rear shocks and front axle seals. The solenoid in the T-case was replaced under warranty. I replaced a "blend door motor" on heater. Sienna needed a water pump and heater blower both on warranty. One TSB then recall on spare tire cable. Has a limp mode due to an engine sensor failure. At 11 years old I had to replace clutch pack in rear diff F150. My ZR2 diesel at 55,000 km. Needs new tires. Duratrac's worn and chewed up. Needed front end alignment (1st time ever on any truck I've owned).Rear brakes worn out. Left pads were to metal. Chevy rear brakes don't like offroad. Weird "inside out" dents in a few spots rear fenders. Typically GM can't really build an offroad truck issue. They won't warranty. Has fender-well liners. Tore off one rear shock protector. Was cheaper to order from GM warehouse through parts supplier than through Chevy dealer. Lots of squeaks and rattles. Infotainment has crashed a few times. Seat heater modual was on recall. One of those post sale retrofit.Local dealer is horrific. If my son can't service or repair it, I'll drive 120 km to the next town. 1st and last Chevy. Love the drivetrain and suspension. Fit and finish mediocre. Dealer sucks.
  • MaintenanceCosts You expect everything on Amazon and eBay to be fake, but it's a shame to see fake stuff on Summit Racing. Glad they pulled it.