US Manufacturers Sinking Like A Stone In China
China is the largest vehicle market in the world. It’s one of the reasons GM pulled out of Europe, India, Australia, Russia, and Indonesia. It wanted to concentrate its efforts in the biggest market with the most profitable outlook in the world; China. So how is GM doing there? “GM’s profitability is sinking like a stone,” says analyst Michael Dunne.
You know that total China vehicle sales fell 8%, so what’s the big deal? It is just like any other market; there will be good years and bad. But GM, Ford, and Fiat Chrysler saw much worse numbers. And, they’re blaming it on the Trump trade wars. Dunne says that’s not the reason.
US manufacturers are sinking like a stone because they underestimated China customers
“GM, Ford, and Fiat Chrysler have underestimated what it takes in products and technology to compete in the world’s largest market,” Dunnes told the Detroit Free Press. Since 2017 the three Detroit manufacturers have seen sales plummet by 1.4 million vehicles. “Leadership in Detroit might like to blame a soft Chinese market,” says Dunne. “But then why are Toyota, Honda, and Germany sales up?”
At least GM is hoping its shift to electric vehicles and automation will help it improve in the eyes of a customer. But those paydays could be years off from seeing profits. As for Ford, it has a multitude of problems. Those include how slow it is to develop new models, a dearth of good local leadership, and its penchant to dealers and partners in China. Generally, Ford was late to the game and has been trying to catch up ever since. It can’t seem to grasp what it takes.
Of all US brands, Jeep should be propping up Fiat Chrysler instead of sinking
The biggest loser could be Fiat Chrysler. It’s got Jeep which should be like printing money in Chian. Instead, its share of the Chinese vehicle market is a fraction of 1%. “Ford and Fiat Chrysler are losing fistfuls of money,” says Dunne.
Chrysler began building Jeeps in China in the 1980s and was the first western auto manufacturer to sell there. It has had a big head start. But those advantages were lost in the Daimler Chrysler era from mismanagement and disinterest.
The US numbers for China sales look like they’ll keep sinking
So how bad are the numbers? Fiat Chrysler is down 41% from last year, Ford is off almost 50%, and GM lost 15% of its market in 2019. To add more to the carmaker’s woes the Chinese Association of Automakers thinks 2020 will see another 2% drop. That would continue the slide that started in 2017.
Analysts feel that new models and more of them will help in the long term. The market moves a lot faster in China. Vehicles get long in the tooth quicker than they do here. So all three Detroit companies need to hunker down and start renewing their current lineups.
Things were so bad for Fiat Chrysler it chose to “relaunch” itself to gain a footing. It’s starting over in some respects. PSA, the company it is merging with, also lacks any dazzling production numbers for the few models it sells.
So, the bottom line is the US manufacturers need some luck and leadership to take advantage of the largest vehicle market in the world.