Why GM Remains Committed to China Despite Losing Money

• GM’s China sales peaked at 4 million vehicles—led by Buick—in 2017, which translated to a 16.2% market share.

• Since then, GM sales have fallen steadily, projecting to hit just 1.5 million sales next year.

• GM CEO Mary Barra told analysts that “over the long term, we’re committed to China. We believe that it’s a market that, over the long term, will have substantial growth.”

What if China grabs General Motors’ intellectual and physical property and kicks you out? I once asked an executive at a holiday party. It was either December 2007 or ‘08. The executive clearly hadn’t considered this scenario, but quickly dismissed it.

After GM emerged as an all-new company after its 2009 bankruptcy and government bailout, it shuttered the Pontiac, Saturn, and Hummer brands the next year and by 2017, left the European market after it sold Opel and Vauxhall to PSA Citroën Peugeot.

Buick, which sold about 40,000 cars in China in 2000, made up the majority of GM’s 1.7-million-unit sales there in 2010 and was saved by that market. There was much buzz in Detroit that Buick could become a China-only brand in what was now the world’s largest auto market.

GM’s sales peaked at 4 million vehicles, still led by Buick, in 2017, according to Dunne Insights. That was a 16.2% market share of 24.72 million vehicles for the year.

As the COVID pandemic emerged, leading to strict lockdowns in Shanghai and other large Chinese cities, the total market had some ups and downs while GM’s sales there continued to slide. In 2023, GM’s sales were almost cut in half from its ’17 peak, to 2.1 million vehicles out of a 20.18-million market, for a 7.8% share.

At the same time, China’s gross domestic product growth, which was in the double-digits for most of the first decade of the millennium, has settled down to “normal” levels that the US and Western Europe would still consider to be pretty good. Real GDP growth was 5.2% in 2023, according to Wikipedia, up from 3% growth in 2022, the year of stifling lockdowns.

The Chinese government signaled that it had become an export-only country with production among various industries sufficient to serve its own population and markets well beyond.

“Imagine a world in which China builds every single car,” Michael Dunne posits in the May 7 edition of the Dunne Insights newsletter. China’s auto factories already have the capacity to assemble half the world’s annual consumption of about 80 million new vehicles, he notes. Citing the firm Global Data’s numbers, Chinese capacity could reach 75% of that by 2030.

Far-fetched? China already produces (with Taiwan) most of the world’s bicycle frames and components and dominates solar panel production in the same way it has had a hold on computer semiconductor manufacturing for several decades.

Dunne earlier this year pointed to the October 2022 bankruptcy of Jeep’s joint venture in China and notes that Ford is losing lots of money there, with its factories running at 25% of capacity. GM, he says, is no longer “making more money than God,” as a former executive once described it.

GM globally made $12.3 billion in earnings before income taxes in 2023, but its China auto joint venture operations lost $200 million. CEO Mary Barra has announced a new strategy of going upmarket with its Detroit brands. It has just launched The Durant Guild, a “premium import and lifestyle platform” with the Chevrolet Tahoe and GMC Yukon its first products, according to George Svigos, executive director of global markets communications.

A similar strategy a quarter-century ago relied on Buick, a semi-premium brand with history in China going back to 1911. By the time of its peak there in the early 2010s, the Buick lineup stretched from Opel-based hatchbacks on the low end to Holden-based rear-wheel-drive sedans at the top.

Now, “General Motors seems to be focusing on Cadillac in China as Buick’s market share continues to slide,” says Sam Fiorani, vice president of global forecasting for AutoForecast Solutions. “Once a strong player in the region, Buick has fallen out of the top 10 among best-selling brands while Cadillac is slowing growing and Chevrolet remains an also-ran.”

Barra told Wall Street analysts in GM’s first-quarter 2024 earnings call that “over the long term, we’re committed to China. We believe that it’s a market that, over the long term, will have substantial growth. We’re continuing to draw on not only our global solutions, but, in some cases, local solutions as we advance our electrification strategy.”

In early May, GM announced that Steve Hill will become president of GM China, replacing Julian Blissett, who had the misfortune of being appointed to leadership there in April 2020 just as COVID was becoming a pandemic.

Hill “has a clear mandate to fully leverage the opportunity presented by accelerating the electrification of our portfolio in China and deploying new technologies,” GM’s executive vice president and president of global markets, Rory Harvey, said in a release.

GM this year will launch a record number of “new energy vehicles” in China, including EVs and PHEVs, Svigos said via email. This includes Chevrolet Equinox and Buick GL8 (executive minivan) PHEVs, the Ultium-based Chevy Equinox and Cadillac Optiq EVs.

The Buick Envision is GM’s only Chinese import in the US, and the Biden Administration’s 100% tariff on Chinese EVs certainly will end that when Buick goes all-EV by 2030 as previously announced.

The two local brands, Baojun and Wuling, have maintained steady Chinese market share since 2017, Svigos says, and are expanding their NEV offerings, though on their own platform and not Ultium, underpinning new PHEVs and EVs. So with virtually no Ultium platform-sharing with GM’s Chinese brands, it appears the automaker has gotten more out of its joint venture there in a quarter-century than it has put in.

If GM management does eventually change its mind about leaving China, it could be pretty easy and quick—unlike Opel/Vauxhall, it doesn’t have to look for a buyer for Baojun/Wuling.