East Vs. West: Why General Motors Is Obsessed With China

Matt Posky
by Matt Posky
east vs west why general motors is obsessed with china

Last month, General Motors announced a plan to introduce more than 20 new and refreshed models in China in 2019 to “maintain its growth momentum in the world’s largest vehicle market” and pump EVs into what is probably the most electric-friendly region on the planet.

GM appears to love China and not without good reason. As the automaker’s largest retail sales market since 2012, GM hasn’t been afraid to fully embrace it — at the expensive of looking like it’s playing favorites and putting its homeland in the doghouse. But is that what’s really happening, or does it just feel that way when an iconic American company starts playing patty cake with a foreign entity?

With 2018 in the rearview, we can take a look at how GM faired in China last year. Cadillac sold 200,000 vehicles for the first time, Chevrolet delivered nearly 530,000 vehicles, and Buick managed to move over 1 million autos for the third year running. By comparison, Cadillac sold 154,702 vehicles in the United States while Chevrolet moved a whopping 2,036,023 units. Buick sold 206,863.

It would appear that America holds a distinct advantage in terms of overall volume, but this isn’t the case. Don’t forget that the company also sells under the Baojun, Wuling, and Jiefang marques — thanks to its many Chinese partnerships. While the total sum of GM brand sales fell further (9.9 percent) year-over-year in The People’s Republic, China still delivered 3.6 million units to the United States’ 2.9 million. The Chinese decline can be attributed to a softening economy, but the U.S. situation stems from an auto market passing its peak. General Motors still sees China as having growth potential and has prioritized accordingly.

“China’s vehicle market has entered a new era of high-quality development, in which product and service excellence will be the key to sustained growth,” Matt Tsien, GM executive vice president and president of GM China, explained during last month’s preliminary product announcement. “GM will continue to optimize our product mix, backed by our industry-leading technologies and adjacent services, and explore more opportunities in electrification and autonomous driving.”

GM expects to exceed its five-year initiative to launch 60 “new or refreshed products” between 2016 and 2020, including 10 new-energy vehicles (NEVs). From 2021 through 2023, the company plans to “maintain momentum” by doubling the number of NEVs it sells.

This is another reason GM seems to, for lack of a better term, prefer China. EV acceptance is much greater there than in the United States. Even as Chinese auto sales started to backslide late last year, plug-in growth remained steady within the Eastern nation. It also has largest collection of electric vehicles, with over 2 million domestically built passenger plug-in models already on the road. Considering that the automaker appears to be in the early stages of transforming itself into a mobility/tech company, it makes sense to drive that much harder in the more-receptive East.

However, this isn’t a phenomenon that’s unique to General Motors. Most automakers are desperate to get into China; GM just showed up earlier and performed better than many of its rivals. Ford continues to get clobbered in the region. But it didn’t make China a priority until long after GM had already brokered multiple deals with local manufacturers and set up factories to support domestic sales. One company put in the time, the other didn’t.

Back at home, GM has said it intends to close down five of its facilities across the United States and lay off (or retire) a significant portion of its American workforce. While some of these efforts are clearly aimed at softening the probable economic downturn predicted by analysts, GM also wants to free up capital in order to increase spending on the development of electric vehicles, autonomous cars, and high-margin crossovers.

This probably wouldn’t sting so bad were there any evidence that the United States is interested in pursuing global trends. The country boasts a long history of having distinct automotive tastes and likely doesn’t want to lose jobs because the rest of the world is more willing to buy EVs. But, with the global markets dictating the majority of future trends, any grievances the U.S. might have will likely fall on deaf ears. Businesses respond to money and most automakers understand that China has deep pockets. General Motors certainly does and it’s making good money because of it.

In the short-term, all of GM’s decisions regarding China seem fairly prudent. However, GM’s profit margins for the region are much slimmer than they are here in the United States. In North America, people splurge on mass-produced pickup trucks. In Asia, GM has to share the wealth with its local partners — many of which are the primary shareholders of their joint venture. Undoubtedly, some will claim it was worth it so the automaker could get early access to the market, but the fact remains that General Motors still makes the bulk of its money on home turf.

[Image: General Motors]

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  • ToolGuy ToolGuy on Feb 13, 2019

    GM and Ford are *global* companies and have been for a long time. They have global headquarters in the U.S., but they are not "U.S." companies (by the way, referring to anything "U.S." as "American" when speaking in a global context never quite sits right with our neighbors in Central America and South America). Peter DeLorenzo ("The Autoextremist") and I had this discussion via email in the early 2000's, to the point where he decided to end the conversation. Automakers were some of the first companies to become truly global - some other industries have followed. The auto companies have been global for much longer than many of us like to realize. (It is interesting to me that the current president of the U.S. also seems to have this view that GM and Ford are "U.S." companies.) Bonus assignment: Become an executive officer of GM. Tell your Board of Directors that you do not completely buy into their vision for operations in China. Now look for a new job. This has been true since at least the 1980's.

  • Tstag Tstag on Feb 14, 2019

    I wonder what makes the European car market so different to the Chinese and US car market? I get that in some European countries volume car makers like Opel are being squeezed out by premium car makers like BMW. But in the volume space I guess the competition is fierce from the likes of Peugeot, VW group, Nissan, etc. That being the case Is Europe a lesson for GMs future in China and the US?

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