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.
Comments
Chinese don’t like Japanese vehicles in general because of history of racism, and they don’t actual trust their own brand. GM has been doing hard in their market, try anything for China same like Toyota marketing in the America.
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Asia buyers want expensive products, cool designs, bright and beautiful colours. They are willing to pay more if it looks good first can perform later.Even the poor Asian guys would starve for few months to get want he wanted. North American buyers worry more about the price. Understanding this trend, if they build cheap cars for Asian market, they won’t make it.
China auto sales for the industry will be reported this evening. Several auto companies already reported sales that were much better than forecast.
Population is around 1.5 billion people, most do not yet own an automobile.
China is a both a short and long term growth story.
“Population is around 1.5 billion people, most do not yet own an automobile.”
China knows this, and so does GM. It’s unrealistic to assume that there will be enough capacity for millions of more cars on Chinese roads, and the Chinese sure as hell wouldn’t want to pay for the infrastructure upkeep for all those cars either.
This is why GM needs to change it’s focus from being an automaker to a transportation manufacturer.
So they sacrifice profits fo volume in China and sacrifice volume for profits in the US. It seems tha GM’s home country customers are looked upon as second class citizens and we rarely get their first and or best . Take for instance the world Colorado vs the US Colorado. We got it several years after everyone else and our equipment and model choices are limited as compared to theirs. No t to mention other vehicle offered in other country’s that I think would be great choices for the US. Not that I blame the fo getting on the China band wagon. I just wish we were their number one choice when it come to getting new vehicles and better choices in equipment. Take care of home first.
This and I will not purchase another new GM if this “strategy” continues. They love to brag about ATPs and it’s starting to feel like they’re rubbing in our face how much we over payed.
Yet the Chinese get volume over profits? That’s a big no go for me.
Also consider the fact that the Asia Pacific production facility for Colorado was sold in its entirety to Great Wall early 2020.
Do business in communist China, and your “PARTNER” is communist China. They can call those communist nationalized companies whatever they want.
The U.S. is always different market. We’re slow to move to small cars until gas crises of the 1970s. As soon as gas goes down size of vehicles and engines goes up. China probably wants electric cause of pollution?
“China probably wants electric cause of pollution?”
Pretty much. The difference being that China could mandate EV sales today and it would become law within 5 years, thereby forcing the market to act. I can’t see the US market as being responsive, and even with “top down legislation”, it would be fought every step of the way.
I was just in Shanghai a few weeks ago, the one thing that is immediately apparent is…..mediocrity is plenty good enough. Younger Chinese consumers want things that their parents and grandparents never had or even wanted, including a vehicle. Branding is very, very important to these younger Chinese, even more so than it is here. It’s just about the label or badge, not much at all about the quality, content or refinement of a vehicle. Speeds are also quite a bit slower. On the expressways we were on to and from Pudong airport. 80 kmh was the limit. (just under 50mph) Few vehicles speed, the fines and penalties are stiff.
It seems that GM has, at least somewhat, adopted the mentality that…..mediocrity is plenty good enough in China and everyone else around the globe will just have to deal with it?
Exactly. GM cars do well in developing countries and places where anything will do because tastes and opinions haven’t been skewed by something better. This does not work in Europe, and only works in the US with much government aid and false propaganda.
China is General Motors biggest auto market with 835,934 vehicles sold for 2018; thus, this market is critical for General Motors and it’s why so many new GM vehicles make their debut in China instead of the United States and this is why GM will adopt more design concepts from their research centers in China.
GM china full year 2018 sales were 3,645,000 units, ( I think your number was for the quarter). The profits are split with local JV partners.
GM’s pace of new vehicle development in China is the major success story for all of GM. The development time has been greatly reduced, and existing models are now more quickly replaced by all new designed products. The result is that GM has greatly reduced the number of older stale models.
More of the development costs for smaller cars and crossovers are incurred in China.
GM China may be offered to increase their ownership of the existing partnerships, by the China Government. I believe Volkswagen recently did this, and maybe Toyota.