iirc, the requirement that foreign automakers partner with a Chinese company has been repealed, meaning the Chinese companies have learned how to build decent cars. And, yes, domestic Chinese brands are taking share away from all the foreign brands.
Recently, the Ford CEO said they are recharacterizing their Chinese ops as a cheap production base for export, rather than for sale in the Chinese market.
Jeep has withdrawn entirely from China. Jeep produces the Compass in India, a market protected from imports. Every Indian market road test of the Compass I have seen, says the same thing âitâs a nice car, but WOW is it expensiveâ. Clearly the Indians and Chinese are not sufficiently brainwashed about the âJeep thingâ to pay the fat margins demanded by FCA/Strabismus management.
GM has managed to lose most of itâs market share in the US over the last 40 years too.
Now, GM and Ford seem to have embraced Welchism, systematically culling their lines of whatever has the lowest ATP and GP, to juice their averages. The Ford CEO recently said he intends to abandon the two-row SUV market, as there is too much competition (meaning, I would presume, he canât jack prices as high as he wants), leaving Ford making only big, three-row SUVs, and trucks, vehicles so huge and expensive, they would be irrelevant anywhere else in the world. My question, going forward, is what are GM and Fordâs plan to prevent someone coming into the lower end markets they have abandoned, and eating their lunch, the way VW, Toyota, and Datsun did, in the past?
Probably developing a moat around their higher-end markets, I suppose. Theyâre aiming to become a specialist in large vehicles, and shore up their brand and consumer identification around that. For example, Toyota and Datsun (now Nissan) may have âeaten their lunchâ in sedans, but theyâve had far less success in pickups or large SUVâs (sales of the Armada and Sequoia are pretty minimal) - because those brands arenât known for being builders of large vehicles. Even though Toyota and Nissan have had plenty of time to establish themselves in the U.S. market (not scrappy upstarts here any more), but they have had difficulty moving up into the larger vehicle segments.
Look, sometimes the right move for a company is to pivot into whatâs working for them, and de-emphasize - even move away from - what isnât. For example, IBM probably wouldnât have survived if it had insisted on a heavy focus on hardware manufacturing instead of shifting into being a technology service provider. If Ford doesnât believe it can make money in the two-row SUV market segment, itâs probably best for them to leave it.
I donât think so. It looks like the western OEMs have realized that they are technologically too far behind China and Tesla in EVs to catch up. So they are partnering with Chinese companies to produce EVs and partnering with Tesla to develop the charging infrastructure.
This is to the advantage of the Chinese because virtually all their companies not named BYD are losing money in BEV sales. NIO for example is said to lose $35K per car (sounds like GM). Partnering with the western OEMs also provides a pathway for export. China has something like 100+ auto companies with most not profitable. Thatâs not sustainable. At some point the Chinese government is going cut their subsidies and a huge winnowing will occur. Those Chinese companies in joint ventures with the west should have a better chance of surviving.
China is also realizing it needs foreign investment, particularly now when stuff like demographics is causing a rapid slow down in economic growth. They need companies like Tesla and Apple to stay in country for the jobs. This becomes particularly acute with the rise of India as significant competitor in the cheap labor market.
With Muskâs recent world tour of countries begging him to build gigafactories, China has to be aware that it now faces competition for the jobs and foreign investment that Tesla provides. Closing itâs market to Tesla or too severely hindering the expansion of Giga-Shanghai is probably not in Chinaâs best interests.
Do they? They have a plethora of domestic automakers. As you point out, many of them are not profitable - and would certainly benefit from China trimming the competitive sails (and sales) from Tesla. They certainly donât want Tesla eating any more of their domestic market. They probably donât want Tesla to keep building its MIC export market at the expense of their domestic producers - especially now that Teslaâs building up Berlin, so more of those MIC exports will go to markets that Chinaâs domestics want to export to. Thereâs no doubt that there would be some economic benefits to letting Tesla make significant expansions to their China plant,
I donât know - thereâs competing interests there, and I donât know if China really needs any more FDI in the automotive sector.
So their plan is retreat and retrenchment? We old pharts remember when the Japanese only brought in subcompacts, but, eventually, the Camry and Accord became the best selling family sedans, replacing the Ford and Chevy products.
The Ford Explorer started out as a modest, two row, SUV, based on the first gen Ranger pickup. Who rules the two row SUV market now? RAV4 and CR-V. The Equinox ranks 4th, the Escape 9th, and the Compass 12th. Farley said he wants to abandon that market segment too.
Sales of anything in that segment are pretty minimal. The best seller last year was the Tahoe, at barely over 100,000. Adding up the Tahoe, Yukon, and Suburban, GM sold roughly 275,000 last year. Ford sold 82,000 Expeditions. Those numbers are tiny, in a market that shifts some 13M new vehicles per year. With tiny numbers, how are they going to support the size of the company, and the size of the CEOâs paycheck? Just keep retrenching, until GM and Ford have one plant each, and single digit market share?
Perhaps. That can be a good plan. GMâs sales are growing this year, as are Fordâs. Again, thereâs nothing inherently wrong with recognizing that your competitive advantage might not be in âbuild every auto segment,â but specialize in particular segments of the market.
Old pharts such as you and me might have a sentimental preference for Ford and GM to be the type of car companies they were back before the first wave of Japanese imports. But that doesnât mean that would be a good business decision.
Of course. They want the US and EU to remain open to their products. Including, and perhaps especially, the impending wave of automotive exports to Europe. But thatâs why Tesla has a little bit of vulnerability in China that makes its success less depending on the degree of the overall EV conversion of the market (which is the point I was responding to). Teslaâs growth in the US depends on the rate at which the US electrifies (or doesnât) - but their growth in China depends on the rate at which the Chinese government lets them grow. If the EU adopts significant protectionist measures against Chinese imports, then I think there will be pressure on China to throttle back the expansion of foreign automakers there.