At an Automotive Press Association event in Detroit on June 18, automotive analyst John Murphy of Bank of America (BofA) made a bold recommendation for General Motors (GM), Ford Motor Company, and Stellantis to exit the Chinese market “as soon as possible.” This advice comes in light of declining market share, increased competition, and geopolitical risks impacting the profitability of the U.S. Big Three automakers in China.
“China is no longer a core market for GM, Ford, and Stellantis,” Murphy stated, emphasizing that “the Detroit Three should focus on their core products and more profitable regions.” This recommendation is driven by GM’s dwindling market share in China, which dropped from about 15% in 2015 to 8.6% last year, marking its lowest point since 2003. GM’s profits from its Chinese operations have also plummeted by 78.5% since 2014.
Increased competition in China, particularly from local automakers like BYD and Geely, has made it challenging for U.S. automakers to maintain their positions. This competition, coupled with geopolitical risks such as tariffs imposed by the U.S. government, has further complicated the business landscape for American automakers in China.
Murphy’s ‘Car Wars’ report, presented at the event, highlighted these challenges and suggested that the Detroit Three should reallocate their resources to more profitable regions. However, he noted that the situation is different for U.S. electric vehicle manufacturer Tesla, which has a cost advantage of approximately $17,000 per electric vehicle component over the Detroit Three. This advantage could allow Tesla to thrive in the Chinese market despite challenges faced by traditional automakers.
The recommendation for the U.S. Big Three to exit the Chinese market carries significant implications, including considerations of lost revenue, cost savings, and the strategic reallocation of resources. GM, Ford, and Stellantis have historically been dominant players in the American automotive industry, with substantial global operations.
As the automotive industry evolves, analysts like John Murphy suggest that the Detroit Three will need to carefully assess their positions and strategies in the Chinese market to optimize their long-term profitability and sustainability.
