American companies continue to try to plow ahead in China despite huge issues with matters like intellectual property theft. They even are doing so despite being faced with large losses stemming from their operations in the People’s Republic. Among those companies doing so is General Motors, the famed American auto-maker, which not only has a large China operation on which it lost lots of money last quarter, but is publically doubling down on that strategy.
Such is what GM CEO Mary Barra said during a late-April quarterly earnings call with GM stockholders and analysts. She said that the company remains committed to both electric vehicles and its China strategy even despite the large losses.
As background, CNBC reports that GM suffered a massive $106 million loss on its China operation in the first quarter of 2024, a big shift from the times in 2016 through 2023 when the PRC market was its largest and quite profitable. In fact, CNBC reports that GM’s market share crashed from about 15% in 2015 to about 8.6% in 2023, and its earnings are down nearly 80% since 2014.
Speaking about the Chinese market during the earnings call, CEO Barra said that GM is “committed” to its China operation, saying, “Over the long term, we’re committed to China. We believe that it’s a market that, over the medium term, will have substantial growth.”
Barra also said during the call that GM is sticking with EV production as well, though it is focusing on the “luxury premium” slice of the market as cheap Chinese EVs flood the market. She said, “We think clearly that market has shifted and the landscape has shifted … with the capability of the Chinese [automakers].” She continued, “But we still think there’s a role and a place for GM to play with luxury premium.”
While Barre remains positive about China and EVs, analysts are less so. For example, Michael Dunne, a former GM executive and current consulting firm CEO who CNBC reports is an “expert on China,” said that the era in which Detroit automakers could operate profitably in China is nearing an end. As he put it, “We’re at the beginning of the end for [traditional] U.S. automakers in China.” He continued, “Everything’s heading in the wrong direction for Detroit automakers in China.”
Dunne added that Tesla might have a shot at succeeding, but the older, Detroit companies don’t. He said, “I call it the Tesla effect. It transformed Chinese consumers’ views on electric cars. Suddenly, wow, here’s the Apple-equivalent of the automotive industry. By extension, electrics were the ‘new cool’ for Chinese consumers.”
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Dunne isn’t the only one to be skeptical. Another former GM executive, Bob Lutz, told Fox Business that the American auto industry’s shift to EVs is a “colossal mistake.” He said, “The problem with the whole EV movement is that there was a colossal amount of hype behind it, from what I like to call the liberal mainstream media, making it sound like everyone’s next vehicle was going to be an EV. And of course the government was pushing it because of their climate change policies. And it just plain wasn’t going to happen, the American public … not even the Chinese public, nobody is ready to get pushed into EVs before the whole infrastructure and the situation is right for them.” He added, “Trying to get it done overnight was a colossal mistake.”
Watch him here:
Featured image credit: By Benjamin Applebaum – https://www.dhs.gov/medialibrary-assets/assets-temp/mary_barra.jpg, Public Domain, https://commons.wikimedia.org/w/index.php?curid=124696299