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]
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 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?
Latest Car ReviewsRead more
Latest Product ReviewsRead more
- 3SpeedAutomatic Auto insurance renewal every six months. Ten year old car, good driving record, own my own home, excellent credit score, no teenagers on the policy, etc, etc, etc.Yet, I pay thru the nose!!!!!Adds on the morning news brag about $500k settlements.I paid less when I lived in New York State.
- Jim Bonham Full EVs are not for everyone, they cannot meet all needs. Hybrids do a much better job of providing the benefits of EVs without most of the drawbacks. I have a hybrid sedan with plenty of room, plus all the bells and whistles. It has 360 hp, AWD, does 0-60 in just over 5 sec.(the instant torque is a real benefit), and I get 29 mpg, average. NOT driven lightly. I bought it used for $25k.Sure, it's a little heavier because of the battery, motor, etc., but not nearly as much as a full EV. The battery is smaller/lighter/cheaper and both the alternator and starter motor are eliminated since the motor assumes those functions. It's cool to watch the charge guage show I'm getting energy back when coasting and/or braking. It's even cooler to drive around part of the time on battery only. It really comes in handy in traffic since the engine turns off and you don't waste fuel idling. With the adaptive cruise control you just let the car slowly inch along by itself.I only wish it were a Plug-in Hybrid (PHEV). Then, I'd have A LOT more EV-only range, along with even more of that instant torque. The battery would be bigger, but still a fraction of the size of a full EV. I could easily go weeks without using much, if any gas (depending upon my commute) IF I plug it in every night. But I don't have to. The gas engine will charge the battery whenever it's needed.It's just not as efficient a way to do it.Electric companies offer special rates for both EVs and PHEVs which lower your operating cost compared to gasoline. They'll even give you a rebate to offset the cost of installing a home charger. You can still get federal (up to $7,500, plus some state) tax credits for PHEVs.What's not to like? My next daily driver will be a PHEV of some kind. Probably a performance-oriented one like the new Dodge Hornet or one of the German Hybrid SUVs. All the benefits, sound, feel, etc., of a gas vehicle along with some electric assist to improve fuel economy, performance, and drivability. None of the inherent EV issues of cost, range anxiety, long charging times, poor charger availability, grid capacity issues, etc. I think most people will eventually catch on to this and go PHEV instead of going full EV. Synthetic, carbon-neutral eFuels, hydrogen engines, and other things will also prevent full EVs from being 100% of the fleet, regardless of what the politicians say. PHEVs can be as "clean" (overall) as full EVs with the right fuels. They're also cheaper, and far more practical, for most people. They can do it all, EVs can't.
- Ron rufo there is in WaSHINGTON STATE
- ToolGuy @Chris, your photography rocks.
- ToolGuy No War for Oli.If you have not ever held a piece of structural honeycomb (composite sandwich) in your own hands, try it.