Times Get Tougher for GM's Chinese Venture As Automaker Orders 3.3 Million Vehicle Recall

Tariffs and other pressures are weighing on the once blistering hot Chinese new car market, and a suspension issue has now added new storm clouds to General Motors’ formerly sunny skies. The automaker’s Chinese arm, GM Shanghai, has announced the recall of 3.3 million Chevrolet, Buick, and Cadillac models.

Bad news for a foreign company in a suddenly dodgy market.

The news comes by way of China’s State Administration for Market Regulation, Reuters reports. Few details are available about the cause of the issue, or what models are involved in the recall. GM Shanghai, the company’s joint venture in that country, would only say a suspension arm can deform under “extreme operating conditions.”

Obviously, the conditions couldn’t be so extreme as to make the likelihood of suspension damage vanishingly rare.

After experiencing steady growth in China over the past few years, GM’s Chinese growth slowed to 0.7 percent in the second quarter of 2018. The third quarter isn’t looking good. Over the last three months, new car sales in that country dropped at an increasing rate — from 5.4 percent, year over year, in July, to 7.4 percent in August. At last count, American automakers hold just a 10.7 percent market share.

GM, like Ford, suddenly finds itself with a price problem. In response to a 25 percent import tariff on Chinese-built vehicles levied by the U.S. in early July, China bumped its tariff on U.S. vehicles to 40 percent. That places upward pressure on sticker prices.

While the Chinese car market still represents great promise in the long run, the near future stands to be rockier than any OEM expected just a year ago. Giant recalls won’t help profits in that region, nor the perception of quality.

[Image: General Motors]