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– John Murphy, chief auto industry analyst at Bank of America, said on Tuesday that Detroit’s traditional U.S. automakers – General Motors, Ford Motor Co. and Stellantis – must exit the Chinese market “as soon as possible.”
The warning from senior Bank of America analysts comes as China, the world’s largest auto market, faces unprecedented competition and a surge in vehicle production for Chinese consumers and global exports, known as overcapacity.
Murphy, who previously called on GM to exit the Chinese market, said the “Detroit Three” automakers needed to focus on their core products and most profitable areas.
“I think you need to see these three Detroit companies exit China as quickly as possible,” he said in suburban Detroit during a discussion of Bank of America’s annual “Auto Wars” report, which was seen by Sky News Arabia.
“China is no longer a core market for GM, Ford or Stellantis,” he added.
Just a few years ago, such a prospect would have been unthinkable for automakers, especially GM, but the rise of local Chinese automakers such as BYD and Geely has put increasing pressure on American companies.
GM’s share of the Chinese market, including its joint ventures, fell from about 15% in 2015 to 8.6% last year — the first time it has fallen below 9% since 2003.
GM’s operating profit in the region has fallen 78.5% since its 2014 peak, according to Wall Street regulatory filings.
GM executives believe they can improve operations and regain market share in China, largely with the help of new electric vehicles.
U.S. companies operating in China also face geopolitical risks and uncertainties after U.S. President Joe Biden announced last month that his administration would quadruple tariffs on Chinese electric vehicles.
Murphy said that while Detroit automakers have to rethink the way they do business in China, the situation is a little different for Tesla, the U.S. leader in electric vehicles.
Murphy explained that Tesla has an advantage of about $17,000 in electric vehicle component costs compared to Detroit’s legacy automakers, which helps the company’s growth in the Chinese market and gives it “more room to move and maneuver.”
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