The United States isn’t the largest auto market anymore. It hasn’t been for years. That accolade goes to China, and with good reason, General Motors has taken to ensure it does well in the country. Just how important is the country to the automaker?
The Truth About Cars dove into why GM seems to, for lack of a better word, prefer the country in its aggressive product onslaught and technology implementation versus the United States. In short, it comes down to a few fundamentals.
China is very accepting of electrification and electric cars in general. Although the Chinese auto market was down in 2018, sales of what China calls “new energy vehicles” remained steady. The automaker not only plans to fulfill its goal of introducing more than 20 new or refreshed models in 2019, but it plans to place a major focus on electric cars. By 2020, GM will have 10 NEVs on sale. By 2023, that number will double.
In the U.S., the country has been much slower to accept and adopt electric cars as gasoline remains cheap. Governments have been less than willing to incentivize the switch to electric cars domestically, too. In China, the government provides hefty subsidies for buyers who choose an electric car. As GM touts its transition to an all-electric automaker in the decades to come, there’s no wonder why China is important.
However, the United States remains the place where GM makes the bulk of its money. Despite volume advantages in China, GM has to share the money it earns with local joint venture partners: SAIC and Wuling. Many of its partners also remain primary shareholders in the joint ventures, though this rule will change in the years to come. GM could, eventually, buy out its joint venture agreements and unlock even more profit potential.
Profit margins in the U.S. remain the real prize as consumers continue to scoop up trucks and SUVs at a fast pace. GM may have a preference for China, but when taking a closer look, there’s no way it could continue business as usual without its dominance back home.