General Motors and other foreign automakers may find it increasingly difficult to be successful in China as the automotive industry changes in coming years, experts believe.
As The Detroit News reports, investment bank Morgan & Stanley released a note this week cautioning investors that American automakers must work now to “preserve what remains in China,” of their business, or make the early decision to “avoid doubling down where they are unlikely to win.”
Foreign automakers in China, not just American ones, may face an uphill battle in the country in coming years as its domestic automakers expand their lineups and begin to capture more and more market share. Additionally, with connected cars quickly becoming commonplace, the transportation sector is beginning to pose a major privacy and security risk – which may eventually lead China to become wary of foreign brands’ products.
Electric cars may be the biggest threat to American automakers’ success in China, though. China’s New Energy Vehicle Mandate, introduced in April of last year, hopes to see the country sell 4.6 million electric vehicles by 2020 and eventually ban internal combustion engine vehicles altogether. Some domestic automakers will also be selected to receive government subsidies to help speed up the transition from ICE cars to EVs.
American automakers cannot simply respond to the mandate by building more EVs, either. China is dominant in electric vehicle battery production and rare earth metal mining, and the US is only now setting up a dedicated supply chain for EV batteries in a bid to reduce China’s lead.
Morgan Stanley’s report concluded that “many foreign auto firms, and in particular some U.S. firms, may be operating on borrowed time,” in China. GM, Ford, and FCA may eventually face a tough decision, then: exit the market early and avoid dumping money into a doomed endeavor, or double down and pray for success.
In the first quarter of 2019, GM’s sales in China dipped 18%, while Ford was down 36%, and FCA was down 41%, according to Detroit News data.
Source: The Detroit News