The New York Times
December 19, 2024
General Motors was a pioneer in China, where for a quarter-century the company drew enormous profits and vied with Germany’s Volkswagen as the top seller of cars.
Those days are over.
G.M.’s sales in China have entered a death spiral, falling 42.5 percent in the first 11 months of this year. The company now ranks 16th by sales. The dizzying collapse of its China business forced G.M. to take a roughly $5 billion charge against profits this month.
It was a drastic comedown for the company, which started in China in 1996 with an initial investment of $350 million and went on to build a network of factories, churning out vehicles and sending billions in profits to its headquarters in Detroit.
G.M.’s early China executives were highly responsive to the unique characteristics of the market. They built bulky minivans with lots of sparkling chrome to appeal to leaders of the state-owned companies that were big customers. They sold Buicks, a faded brand in the United States that still had cachet in China. For rural farmers, G.M. offered vans and pickup trucks with flimsy seats and no air-conditioning that cost only $5,000.
China allowed foreign carmakers like G.M. into the country only as part of a publicly stated, long-term policy to gain technology and build its own globally competitive industry. Government leaders were also intent early on to shift away from cars that needed gasoline, which China mostly imports, and toward electric cars powered by energy sources at home like coal, solar and wind.
G.M. executives foresaw China’s strength, particularly in electric cars. “China is well positioned to lead in this,” David Tulauskas, an early G.M. director of China government policy, said in a 2009 interview.
Since 2008, Beijing has collected taxes totaling more than 100 percent on large, imported cars and sport utility vehicles. The taxes are so high that G.M. does not even try to import some models, like the Cadillac Escalade. That full-size S.U.V. starts at $87,595 in the United States but costs $186,000 including tax in China, when purchased through an import agent.
Electric cars made in China face only a 13 percent tax.
In addition to wielding tax policy at foreign carmakers, Beijing limited or blocked government subsidies for cars built by foreign companies. Partly as a result, G.M. has not competed effectively in battery electric vehicles and plug-in hybrid cars. These models together accounted for 52.3 percent of the Chinese market in November, the China Passenger Car Association announced last week. That was up from 32.8 percent in January.
But after years of success, G.M. has found it increasingly difficult to compete with Chinese rivals or adapt to the rise of electric cars.
Government policies that forced G.M. into joint ventures with Chinese companies meant that G.M. ended up teaching much of what it knew about car manufacturing to local rivals that now outsell it.
These fast-growing categories account for less than 20 percent of G.M. sales this year — while its sales of gasoline-powered cars have halved.
Article continues at link.
.
December 19, 2024
General Motors was a pioneer in China, where for a quarter-century the company drew enormous profits and vied with Germany’s Volkswagen as the top seller of cars.
Those days are over.
G.M.’s sales in China have entered a death spiral, falling 42.5 percent in the first 11 months of this year. The company now ranks 16th by sales. The dizzying collapse of its China business forced G.M. to take a roughly $5 billion charge against profits this month.
It was a drastic comedown for the company, which started in China in 1996 with an initial investment of $350 million and went on to build a network of factories, churning out vehicles and sending billions in profits to its headquarters in Detroit.
G.M.’s early China executives were highly responsive to the unique characteristics of the market. They built bulky minivans with lots of sparkling chrome to appeal to leaders of the state-owned companies that were big customers. They sold Buicks, a faded brand in the United States that still had cachet in China. For rural farmers, G.M. offered vans and pickup trucks with flimsy seats and no air-conditioning that cost only $5,000.
China allowed foreign carmakers like G.M. into the country only as part of a publicly stated, long-term policy to gain technology and build its own globally competitive industry. Government leaders were also intent early on to shift away from cars that needed gasoline, which China mostly imports, and toward electric cars powered by energy sources at home like coal, solar and wind.
G.M. executives foresaw China’s strength, particularly in electric cars. “China is well positioned to lead in this,” David Tulauskas, an early G.M. director of China government policy, said in a 2009 interview.
Since 2008, Beijing has collected taxes totaling more than 100 percent on large, imported cars and sport utility vehicles. The taxes are so high that G.M. does not even try to import some models, like the Cadillac Escalade. That full-size S.U.V. starts at $87,595 in the United States but costs $186,000 including tax in China, when purchased through an import agent.
Electric cars made in China face only a 13 percent tax.
In addition to wielding tax policy at foreign carmakers, Beijing limited or blocked government subsidies for cars built by foreign companies. Partly as a result, G.M. has not competed effectively in battery electric vehicles and plug-in hybrid cars. These models together accounted for 52.3 percent of the Chinese market in November, the China Passenger Car Association announced last week. That was up from 32.8 percent in January.
But after years of success, G.M. has found it increasingly difficult to compete with Chinese rivals or adapt to the rise of electric cars.
Government policies that forced G.M. into joint ventures with Chinese companies meant that G.M. ended up teaching much of what it knew about car manufacturing to local rivals that now outsell it.
These fast-growing categories account for less than 20 percent of G.M. sales this year — while its sales of gasoline-powered cars have halved.
Article continues at link.
.
