Does Detroit Automakers Have a Future?

Investment Analysis Clubs Macro Economic Trends and Risks
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Reading this article raises this question in my mind. But, and it is a big but, can we trust China data?

China has reached more than 50% plugin vehicle market share. Actually, that achievement could stand for two things. Plugin vehicles account for more than 50% of all new auto sales in China, and Chinese EV sales account for about 50% of the world’s EV sales.

One thing that’s often said is that all of these Chinese EV producers are just losing money producing and selling these EVs. However, that’s not really the case. Chinese automakers are actually making money selling EVs.

An interesting article today from CarNewsChina highlighted how much gross profit margin several Chinese automakers are scoring. The article also highlighted, in the headline, that four of these companies now have higher gross profit margin than Tesla!

note that Tesla’s gross profit margin was 16.3% in the 1st quarter of 2025 (its average across 2024 was 17.9%, which was down significantly from its 2023 average of 20.67%).
The above is not a big deal as we knew Tesla’s pricing power would erode as more competition entered the EV market space. 16.3% gross profit is respectable.

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I have teeny positions in BYD & Xpeng.
I was surprised Xiaomi isn’t on the list. At the end of my post I will provide some info on Xiaomi.

All in all, I think it’s very important to highlight that Chinese EV producers are beginning to get healthy gross profit margins — even better than Tesla’s — and even net profit in a handful of cases.

Ford is still losing money on EVs.

However, Ford also projected up to $5.5bn in losses for its electric vehicle (EV) and software operations in 2025.
And Ford EVs sales are imploding.
https://fordauthority.com/2025/07/ford-ev-electric-sales-numbers-figures-results-second-quarter-2025-q2/
Ford EV Sales Down 31 Percent With All Three Models In The Red During Q2 2025

GM is nearing the crossing of the Rubicon into profitability.

In a letter to shareholders, GM CEO Mary Barra described its EV business as “variable profit positive,” in which the revenues from its EVs exceeded the fixed costs of manufacturing the vehicles, including labor and building materials. It did not include costs such as building assembly lines, but it does show that GM is making progress on its EV business, Reuters says. That all doesn’t make GM’s EV division profitable, per se — but it’s certainly getting there.

GM is still having their *ss handed to them in China market space. $4+ billion charge.
GM EV sales?
https://insideevs.com/news/755280/gm-ev-sales-q1-2025/
GM EV sales are up 94%, pacing to secure the company’s place as the second-biggest EV company in America. But there’s a big, big asterisk on that claim. The company is crushing it with EVs, but its two volume sellers are made in Mexico.
How much will the 25% tariffs whack sales?
The big sales boost was as a result of GM offering relative affordable EVs for sale.

So China EV manufacturing is smart and efficient and aided by their government actions.

“If you want to manufacture a battery to put into an electric car today, all roads go through China,” says Mr Dunne.

Some refer to this as “state capitalism”. Western countries call it unfair business practice.

Chinese EV executives insist all companies, domestic or foreign, have access to the same resources.

As a result, they argue, China now has a thriving EV start-up sector, driven by fierce competition and a culture of innovation.

“The Chinese government is doing the same thing you see in Europe and in the US - providing policy support, consumer encouragement and infrastructure,” Brian Gu, president of EV maker XPeng, tells the BBC.
Though no longer within the USA.

“But I think China has done it consistently and in a way that really fosters the most competitive landscape that there is. There’s no favouritism to anybody,” he adds.

It seems to me that GM & Ford are doomed for US EV profitability. Though that could change in 3 years as US government support resumes or 100% tariffs decline on China EVs.
Is US Auto manufacturing a strategic need for the USA?

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Xiaomi info:
https://electrek.co/2025/03/18/xiaomi-hits-200000-ev-deliveries-119-days-raises-2025-target/
Xiaomi hits 200,000 EV deliveries in a scorching 119 days and raises 2025 target

https://www.reuters.com/technology/xiaomi-reports-48-rise-fourth-quarter-revenue-2025-03-18/
raised its target for electric vehicle deliveries this year to 350,000 from 300,000.

Xiaomi claims that it’s the fastest new auto OEM to produce 100,000 vehicles. That is, no new auto OEM has produced 100,000 vehicles in a shorter amount of time. It took the company 230 days to achieve that milestone.

Since March 2024, Xiaomi has delivered over 250,000 vehicles, quickly emerging as a key player in China’s rapidly growing new energy vehicle market by leveraging advanced smart manufacturing and a favorable policy environment to fuel its rapid ascent.

Every 76 seconds, a new Xiaomi vehicle rolls off the production line at the factory, with over 700 robots operating around the clock to enable the full automation of key processes such as large-scale die casting.

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People are working on the lithium battery problem. Projects for purified battery grade lithium have been announced. As usual many have been delayed or stopped due to falling lithium prices. (I wonder who’s behind that?). Purification technology is readily available. It’s mostly environmental concerns. What to do with waste streams. Investment required.

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In the back of my mind, has been the thought that the big three’s embrace of EVs was entirely driven by looking at Tesla’s fat gross profit, which has been significantly higher than their GP on gas cars. Since the companies have trained Wall St to look at ATP and GP, shifting to EVs looked like an easy way to fluff up both metrics. Compare EV GP to Ford’s GP

Screenshot 2025-07-19 at 11-24-49 Ford Motor Gross Margin 2010-2025 F MacroTrends
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There are a couple differences between the US and China: China is a command economy, with no domestic oil supply. The US is, for the time being, awash in oil, and big oil has influence.

So far, big oil has been getting what it wants, including the vehicle fuel economy regs being rendered ineffective, and EV subsidies being repealed.

Steve

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Gross Profit without Net Profit is worthless.

What is the market cap of these 4 Chinese Automakers?

The Captain

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That is what I kept wondering, as the “news actors” on bubblevision nattered endlessly about “EBITA”, because interest and taxes are real, cash, expenses, non-payment of which, has consequences.

Steve

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Market caps
BYD-$266 B
Geely-$24B
SAIC-$12B
General Motors-$51B

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I doubt it. In 2024, a bigwig at Geely revealed in the context of Geely moving to make hybrids:

During an earnings conference in March, Gui Shengyue, a senior executive with Chinese carmaker Geely, said the only auto companies in China making money are the ones producing internal combustion engines.“The pure electric-vehicle firms are not profitable,” he said. With the sole exception of Tesla, no pure EV producer has managed to get out of the red. Chinese companies BYD and Li Auto are profitable, but they also make plug-in hybrids or focus on extended-range EVs. https://www.bloomberg.com/news/newsletters/2024-10-07/china-s-ev-makers-turn-to-hybrids-in-pursuit-of-elusive-profits

That Tesla remains competitive in China despite competition that sells their Chinese BEVs at a loss is pretty remarkable.

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Likely in response to BYD heavy hybrid sales in China.
Yes many China EV makers will head to wrecking yard as intensive price cutting is occurring in China Market space. But the top tier Chinese automakers are rapidly expanding their exports as they sell them at premium prices overseas.

  • Six of the top 10 global EV sellers are now Chinese brands.
  • Chinese companies captured 85% of EV sales in Brazil and Thailand last year.
  • Mainland carmakers are establishing local production lines and R&D centers worldwide

Global EV market share

There are six Chinese firms among the top 10 EV sellers in the world.

BYD

22.2%

Tesla

10.3%

Wuling

4%

BMW

3.1%

Li Auto

3%

Geely

2.7%

Volkswagen

2.6%

Aito

2.2%

Mercedes-Benz

2.2%

Aion

BYD leads the charge with ambitious expansion targets. In 2025, the Shenzhen-based company aims to almost double its international sales to 800,000 units from 417,204 last year.

BYD operates in over 50 countries, selling their vehicles in over 70 countries on 6 continents.

In 2024, BYD captured approximately 18% of the global EV market, selling 4.27 million NEVs out of a global total of 23 million EV sales.

BYD is building or has built overseas factories to avoid tariffs increasing their profits.
Indonesia, Mexico, Hungary, France & Thailand to name a few.
BYD is also has manufacturing plants for electric buses in USA & Brazil.

BYD goal is to have 1/2 of their sales from oversea markets.

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I used to do an occasional item called “spin cycle”, for opposite takes on the same news, on the same day. Seems today is a good day for one of those posts:

Trump tariffs take a $1 billion bite out of GM earnings; shares fall

https://www.reuters.com/business/autos-transportation/trump-tariffs-take-1-billion-bite-out-gm-earnings-shares-fall-2025-07-22/

Steve

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That’s great. But where does it say that any of these companies are making a net profit from their BEV sales? The simple fact that this information is not available is itself suggestive.

This has long been the Chinese model for gaining exports. It is called “dumping”. It comes in various forms. For example:

China’s auto industry has inflated car sales for years through a burgeoning government-backed grey market that registers new cars right off the assembly line and then ships them overseas as “used” vehicles.

These so-called “zero-mileage” cars have never been driven but they are being exported as used to markets like Russia, Central Asia and the Middle East, allowing Chinese automakers to show growth and to dispose of cars that it would be difficult to sell domestically, according to a Reuters review of government documents and interviews with five auto dealers and car traders. Exclusive: China auto industry inflates sales by exporting new cars as 'used' | Reuters

The process begins with the mandated production and sales targets that come down from the government, dictating to its state-controlled industries what targets they need to hit. If they meet those sales targets, there are incentives like promotions and expanded budgets. Those who fail to meet targets are often punished by the state. This has led to auto dealers, exporters, and other outside companies buying Chinese domestic vehicles right off the assembly line as new, and then immediately shipping them to the Middle East, Central Asia, and Russia where they’re sold at lower prices as “fake” used models. https://carbuzz.com/china-knows-building-too-many-cars-wont-stop/

Short answer is that it is very likely much of those glowing Chinese export numbers are heavily inflated and involve cars being sold below cost.

It also should be noted that even the best of the Chinese car companies are feeling the effects of Chinese car dumping and a global economic slowdown.

It’s claimed that BYD has cut night shifts at some of its factories while also reducing output by at least a third. These changes have reportedly been made at four factories, at least. In addition, BYD is believed to have suspended plans to set up several new production lines. Cracks Are Beginning To Appear In China’s Largest EV Maker | Carscoops

Geely Auto, China’s second-largest carmaker, has announced a strategic decision to stop building new car plants in response to severe global overcapacity. Chairman Li Shufu made the announcement during the Chongqing Auto Show, signalling a broader shift in the automotive sector as Chinese manufacturers grapple with shrinking profit margins and intense price competition. Geely Stops Building New Car Plants Amid Global Overcapacity

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Chinese EV manufacturers expansion overseas is good for domestic Chinese EV makers. BUT there is a BIG pitfall for the consumer if he buys a Chinese EV from a lower tier Chinese manufacturer. Service & parts shortages or are nonexistent. Also the lower tier Chinese EV maker may be headed for bankruptcy. BYD has cut domestic pricing to drive competitors into bankruptcy.
I have read that there was once 500 Chinese EV manufacturers. Now there are 100.
https://www.reuters.com/business/autos-transportation/only-15-electric-vehicle-brands-china-will-survive-by-2030-alixpartners-says-2025-07-03/
Only 15 electric vehicle brands in China will be financially viable by 2030, AlixPartners says

Even more dire news:

The above suggests that some legacy automakers may not survive the cut.

Wharton suggest Tesla & BYD are likely to survive.
BUT
Established automakers with EV products have another advantage over EV startups in that they can ride out the current demand slowdown by shifting to hybrid vehicles, MacDuffie noted. Several legacy automakers such as General Motors, Honda, Toyota, and Ford have taken such a portfolio approach to increase their hybrid offerings.
Yep that is what is occurring. Toyota was lamblasted here on the board for its lagging approach to EVs. It appears its hybrid concentrated strategy was a smart move.

Established automakers have another advantage over EV startups. “They already know how to do the design, the build, the supply chain, and the distribution,” MacDuffie continued.
I disagree with the above paragraph. Ford & GM have been laggards on their EV design. And they do not have the degree of vertical integration that Tesla & BYD have achieved.

So the EV shakeout will continue. And it remains to be seen who survives it.

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See OP
And on their oversea sales-Chinese EV are making large profits and still are priced under the competition:
https://insideevs.com/news/718036/byd-major-ev-markup-prices/
Here’s Why BYD Is Charging Twice The China Price For EVs Sold Abroad

BYD wants to rake in the big bucks by adding significant markup to its EVs sold in Europe or the Americas.

https://evboosters.com/ev-charging-news/significant-price-differences-for-chinese-evs-in-foreign-markets/
Significant price differences for Chinese EVs in foreign markets

A recent report from BBVA Research looks at significant price differences between Chinese electric vehicles sold in the domestic market and those shipped to their major foreign markets. The study points to a significant price premium in Western Europe as a clear signal of strong demand for Chinese electric vehicles despite mounting trade tensions and tariff challenges.

Export sales may be shrinking but China EVs still dominate global sales.
https://electrek.co/2025/06/16/byd-overtakes-tesla-as-chinas-ev-giants-dominate-global-sales/
BYD overtakes Tesla as China’s EV giants dominate global sales

China’s EV automakers have surged ahead of the competition in global EV sales, and a new report shows just how far ahead they are.

China now accounts for over 11 million EVs sold annually – over half of global EV sales.

Companies like Geely and SAIC have already hit 50% EV sales share, meeting their 2025 targets a full year early. In fact, Chinese automakers took the top five spots for ZEV class coverage, and five out of the top six for EV sales share.

And from your carscoops link:
In March this year, BYD announced that its annual revenue for 2024 reached 777 billion yuan ($108.3 billion), surpassing Tesla’s $97.7 billion. This marked a 29% increase from the previous year, driven largely by strong hybrid vehicle sales, positioning BYD as the new leader in the electrified market.
BYD appears to be doing quite profitability wise.
They may be experiencing a temporary glut as has Tesla has in the past. But they will work their way through it.

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It is always fascinating to stare into a foggy soggy bloggy information environment looking for anything certain at all.

We will not see anything but droplets on our eyeglasses, at least for half an economic cycle or so….

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Meanwhile, an Aussie EV fan is claiming his YT channel is being obstructed by a sinister conspiracy of Toyota and big oil.

Steve

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Worse, extracting magic numbers from the fog of commerce.

The Captain

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At least for the time being, I think any Chinese autos will have the same reputation as Japanese autos in the 1960s. For those not old enough to remember, “Made in Japan” was not a positive attribute. You said that about something of low quality. Japan turned that around, and now make some of the best cars on the planet. Could China do that? Maybe. But for now, their quality reputation is non-existent. And their product safety is a joke (e.g. poisoning peoples’ pets a few years ago, lead paint in ceramics, etc).

I wouldn’t take a Chinese-made car if you gave it to me (because I’d have to pay taxes on it). Again, that could change some day if the Chinese get their acts together. But not today.

As long as Detroit doesn’t get complacent (like they did in the 70s when Japan started kicking their butts), they’ll be fine. BEV is the future. They would be foolish not to keep a hand in the mix, even if they back off from plans to be 100% BEV by some date (as some makers claimed they would). And there is demand for it, as evidenced by all the non-Tesla EVs I see every time I go out.

It’s likely that lithium will become obsolete as new technologies are developed. Solid state batteries not prone to dendrites are promising. Not ready yet. There was a PBS (NOVA, I think) special on batteries a few years ago. If you’re really interested in this, it might be beneficial to go find it and watch it; and know that that was the state of things a few years ago. They have undoubtedly advanced since then.

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China made vehicles that come to the US [Volvo, Buick. Polestar & a Lincoln model] and EU [BYD, Geely, Nio, Xpeng, MG & others] must meet their respective regions safety & crash standards.

I originally thought EVs were rich man’s toys. Super fast acceleration and only a few hundred miles of range. I was flabbergast at the speed of advances in battery technology extending range. More charging stations need to be built. But doing a long range trip isn’r quite the chore it was a few years ago. The US market space still needs a low cost or comparable cost close a IC vehicle to really gain traction. Also as the bugs are worked out in the robo-taxis; they very well might be the mode of transport in large urban cities. The need for a personal vehicle in those regions may vanish.

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Of the Big Three in Detroit GM has the best chance of succeeding. Their EV line up is doing well, is varied and growing, has great styling, and the products are easily worth buying. That platform has the added benefit of sales via Honda and Acura as well.

Dodge has problems with a customer base that doesn’t believe in climate change and sees nothing dangerous with continued petroleum use. That company is doomed.

Ford seems to be stuck. They came out with the Mach-E and the Lightning, and then nothing else. Unlike GM they have not introduced new models. An electric Explorer would have been a no-brainer. Ditto for the Focus.

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They are having trouble moving Lightings. The plant in Dearborn barely keeps one shift going. They even suspended that shift for a while last winter. Meanwhile, they keep working on their “Blue Oval City” plant, to build more EV pickups. They are dropping the Escape compact ICE SUV and shutting Louisville Assembly for “retooling”, to build an unspecified EV, eventually.

Ford offers “Explorer” and “Capri” EVs in the EU, built on licensed VW platforms and powertrain. Due to soft demand, the Cologne plant has announced a RIF.

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Steve

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You need to watch the “Look Who’s Driving” (IIRC) program on NOVA. It did a deep dive into automated driving. Turns out, it’s a lot more complex that it seems. Our brains do a lot of processing in the background that we are unaware of, and is extremely difficult for a computer to do (at least one small enough to fit in a car). For us organics, it’s easy.

Plus, there’s a reason why Waymo (et al) only operate in cities where the weather is good. They can’t handle it when the cameras can’t see the road markings, or are obscured by heavy rain or snow. We humans have issues in those conditions as well, but we’re actually better at managing them than a computer.

It was a really fascinating program (IMO), and made me rethink the entire “driverless car” idea. I don’t think we’ll be seeing widespread roll-out of “Johnny Cab” any time soon (if ever).

But a lot of that tech can be employed in the form of driver assist. Our ID.4 has a lot of driver assist, and I really like it. It helps a lot.

“Driverless” may be feasible on freeways with no cross traffic, no pedestrians, and no traffic signals. It might even be preferable to long-haul truckers who can suffer fatigue (and maybe fall asleep). I imagine a situation where a truck is loaded, a driver takes it to a staging area at a freeway entrance, and then the truck goes on driverless until it reaches a staging area close to its destination. Then another person boards, and takes it to Costco or Walmart or wherever its final destination is.

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