American Automakers Losing Footing in China's Wonky Market
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.]
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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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.
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.