Foreign Automakers Falling Off A Cliff In China

in #hive-16792227 days ago

Automakers have long used China as a cash cow. This is no longer the case. In fact, foreign automakers are rapidly being shut out of the world's largest car market.

An example: General Motors sold 4 million vehicles in China in 2017. Last year, that number was half of what it was then.

This is all part of the decline of legacy auto. If they lose the world's largest market, what does it leave them with? It is why both the United States and EU are putting heavy tariffs on Chinese automakers.

Are they really facing the prospect of being completely shut out of China?


Source

Chinese Sales Falling Off A Cliff For Foreign Automakers

There is a difference with China: it is not tariffs or some type of action that is locking automakers out. Instead, they simply are failing in the market.

Global carmaking giants like General Motors (GM), Nissan and Volkswagen have long relied on China for billions of dollars in sales every year. Yet as domestic competition surges, the idea that foreign automakers could depart China entirely in the next five years is nOW being discussed as a real possibility.

Feeling the heat is GM, VW, and Nissan:

In 2023, GM sold fewer cars in China than it sold in the United States for the first time since 2009. As recently as 2017, it sold more than four million cars in the country: by the end of last year, that number had plunged by almost a half. Germany’s Volkswagen and Japan’s Nissan are still selling more in China than in their home markets — but the gap has narrowed considerably.

In short, Chinese buyers are rejecting foreign automakers.

The declining fortunes of foreign automakers are largely down to the rise of domestic competitors, many of whom are ahead both in producing electric vehicles and adopting cutting-edge software.

We have discussed the adoption of EVs in China. The latest numbers reveal that EVs sales account for more than 50% of new vehicle sales. BEVs are about 1/3 of the total.

Legacy auto is falling short here. They are also suffering when it comes to software. Many of the automakers tried to enter the sector only to punt on it.

Even Ford CEO Jim Farley was surprised at the advancement of Chinese automakers.

The Inevitable Decline

EVs. Software. Direct-to-customer.

There is massive disruption taking place in the automotive industry and it is starting in China. Eventually this will spread to the rest of the world.

As the number of units decline, this puts stress on companies balance sheets that are mired with debt. They also see Wright's Law operating in reverse.

With declining sales, production is reduced to match. This means the economies of scale diminish, raising per unit costs. This further reduces the competitiveness of products that are already falling out of favor.

At this point, in my mind, it is not a question of if but, rather, when countries are faced with the decision to bail out the auto industry or not. The United States, Japan, and Germany will all have to confront this prospect.

The Big Three might be leading the charge on this:

“There are three things that explain the turnaround: the emerging strengths of the Chinese auto industry, the transition to new power [sources] such as EVs, hybrids, fuel cell vehicles, and last but not least, the weakness of the American auto industry, particularly the Big Three,” says Gregory Noble, professor emeritus at the University of Tokyo, referring to GM, Stellantis (formerly Chrysler), and Ford Motor company.

Source

Stellantis is making major headlines with the issues it is having. General Motors is managing to stay out of the mainstream press, probably due to the large advertising budget it carries.

The problem for the West is that it still believes that it is the leader in automotive. China has the largest market, but a pretty good margin. It is also a major exporter, something that is being countered by tariffs. That said, countries will not be able to keep the Chinese out forever.

It is likely we see consolidation among legacy auto. They are going to have to reduce expenses and address their debt issues. For example, Volkswagon has $221 billion.

Declining sales tends to mean less cash which to service debt.

This is could be accelerating.


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Tariffs aside, foreign automakers' struggles in China reveal a deeper issue of failing to understand local consumer preferences and adaptation to changing market conditions.

What is going on in the world that the big companies, especially in the vehicle sector, are in decline? In Venezuela, cars are sold by intermediaries, there are no longer direct companies that do not even assemble vehicles, as there used to be when Toyota operated.https://inleo.io/threads/view/omarrojas/re-leothreads-2ovaeeqva?referral=omarrojas

It is changing completely. The next few years will show how different the industry is.

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I think that's what the trend in other countries too and going with local manufacturers is increasing.
In India, we do have foreign brands like Hyundai, BMW, Audi and all, but we did see recently brands like Chevrolet, Ford, Citroen etc. are getting declined and First 2 infact have closed their car sales in India and only maintenance support continued for 7 years.
On the other hand, local brands like Maruti Suzuki and Tata have flourished in last few years and have better numbers with regards to sales especially in the EV sector with Tata Nexon being the supreme leader in EV motor vehicles in India.

Thanks for sharing.

That makes sense. As the local stuff improves, which I presume is happening in India, more of the market share will be garnered by local entities.

Yep, definitely, The current Government in India is more growth oriented unlike the other party which ruled over 70 years, but there hasn't been that progress.
We are really seeing the improvement in all sectors and that's a positive sign for all of us here.

Yeah. There is a lot of potential with India. There is a strong technology sector which will help the nation during this further expansion into the digital age.