General Motors (GM), the Detroit-based automaker, has been losing ground in China, which has been its top sales market for over a decade and one of its two main profit engines. GM’s market share in the country, including its joint ventures, dropped from roughly 15% in 2015 to 9.8% in 2021, the first time it has dropped below 10% since 2004. Its earnings from the operations have also declined by almost 70% since reaching their peak in 2014.
Although the coronavirus pandemic originated in China, it is not the sole reason for GM’s decline. The declines started years before the global health crisis, and they have been getting more complex amid rising economic and political tensions between the United States and China. Furthermore, there is growing competition from government-backed domestic automakers fueled by nationalism and a generational shift in consumer perceptions regarding the automotive industry and electric vehicles.
For example, Will Sundin, a 34-year-old science teacher who lives in Changsha, the capital city of China’s Hunan Province, recently purchased a Nio ET7 electric vehicle as his daily driver. Sundin, who also moonlights as a YouTube car reviewer, knows the Chinese vehicle industry well and chose the Nio over models from rival Chinese automakers Xpeng, Li Auto, and IM Motors. He said the vehicle’s ability to swap out the battery for a fresh one, rather than recharging, “put it ahead pretty quickly.”
American brands such as GM’s Cadillac and Buick, which initially led the automaker’s growth in China, were not on his consideration list. “Cadillac has a good image in China, but it’s expensive,” Sundin said. “I think the problem they face is that they have competition, new competition, a lot of new competition, from different directions that they weren’t expecting.”
That competition is increasingly becoming a problem for GM, which has acknowledged such issues with its Chinese business. However, the company has not offered much assurance on how to reverse the trend other than the promise of new EVs and a new business unit called The Durant Guild that will import pricy vehicles with high margins from the United States to China.
While many US brands are not performing well in China, GM’s decline is especially notable. GM’s operations in the country are much larger than those of its crosstown rival Ford Motor, for example. It also has a much smaller footprint globally after shedding its European operations and shuttering operations elsewhere to largely focus on North America, China, and, to a lesser extent, South America.
Being overly reliant on only a few markets can be risky, but it has led to record earnings for GM, as the company under CEO Mary Barra has done away with underperforming operations. Electric vehicles could be a new opportunity for GM to grow globally, but experts say it would be an uphill battle compared with recovering in China in the years to come.
“With the changes that they put in place, with a refocus on North America and China, the pull out of Europe, essentially, that does create a risky scenario now that you have some issues, multiple issues, going on in the Chinese market,” said Jeff Schuster, executive vice president of LMC Automotive, a GlobalData company.
GM has been downplaying the role of its operations in China in recent quarters, including CFO Paul Jacobson saying China is “not decisive” to GM’s financial performance when he discussed earnings in October. However, China is an important part of GM’s business, according to CEO Mary Barra, who said the company is paying attention to other issues, which then included the government’s now-defunct “zero Covid” policy and recent protests.