The Sudden Death of Detroit in China
GM, Ford and Jeep Meet Their Maker All Too Soon
The Sudden Death of Detroit in China
The bodies are still warm. But the victims are already dead.
Natural causes? Or was there foul play?
GM, Ford and Jeep – once darlings of the Chinese consumer – are goners. Sales have collapsed. Profits are heading toward zero.
In 2023, the Detroit Three sold 3 million fewer cars in China than they did in 2017: 2.3 million vs 5.4 million. That is six straight years of falling sales – and we have not hit bottom yet.
Jeep’s China joint venture went bankrupt in October 2022, despite operating in the world’s largest SUV market.
Ford is losing buckets of money, operating at just 25% of its plant capacity.
For years GM made 'more money than God' in China, a former executive once told me. Today, the company is grasping at straws. Mary Barra recently told investors that GM would move its products upmarket in China to be "more premium and high end," including the Cadillac Celestiq, starting at $300,000.
That's a roundabout way of saying that GM can no longer compete in most segments of the China market.
Detroit’s China demise came so suddenly that there was talk of summoning Inspector Jacques Clouseau, the internationally famous solver of murder mysteries. Alas, China would not grant Monsieur Clouseau a visa.
So we are left to piece together clues on our own: How did the Detroit 3 expire so swiftly? And what might the end of Detroit in China tell us about what happens when Chinese automakers enter the US market?
Complacency & Confusion
Complacency kills. And smugness was no small part of what happened to Detroit in China.
For decades, they knew nothing but growth and profits. GM, Ford and Jeep – along with their Chinese JV partners – grew convinced of two eternal truths: First, Chinese consumers would forever prefer foreign car brands like Buick, Chevy and Ford over the Chinese offerings. And second, gasoline-powered vehicles would be dominant until kingdom come.
As things turned out, they were wrong on both counts.
Bureaucratic confusion also played a role. “Our guys in China can’t make up their minds,” a senior GM executive in Detroit told me in 2018. He was referring to his colleagues working at the Shanghai-GM joint venture. “Last week, it was 'we should hurry up and get more EVs ready' for the China market. This week it’s ‘wait, never mind’.”
When Chinese demand for EVs started its explosive growth in 2020, the Detroit 3 were caught flat-footed and without products.
The tables turned in what seemed like a blink of an eye. Chinese EV brands were now in the lead. “When a Chinese buyer considers an EV, he thinks Tesla or one of the Chinese brands,” a senior executive from BYD told me in 2021.
“Ford and GM are seen as old fashioned, out of step with the times.”
EVs now account for 1 of every 3 new cars sold in China, Tesla is the only non-Chinese brand in the top 10.
More Than Meets The Eye
Now, hold on a minute. Inspector Clouseau would be disappointed if we simply stopped our investigation there and called it case closed. I can almost hear him teasing us: “Was there not more going on than meets the untrained eye?”
Clouseau knows things. Detroit's fall was also part of a grand Chinese plan. Detroit automakers had served their purpose, bringing advanced technology and processes to China. Now that China had what it needed, Detroit was being shown the exits.
I first sensed this larger scheme years ago when I asked the Chinese Minister of Industry whether Detroit’s JVs in China would succeed over the long term. After all, the Chinese themselves describe JVs as precarious arrangements with partners “sleeping in the same bed, dreaming different dreams.”
The global automakers wanted market access. And the Chinese wanted technology.
“Look, despite their different dreams, they are still sleeping together,” he said with a chuckle. The Chinese, he hinted, were biding their time, waiting for the moment when they could emerge independent and triumphant, leaving the joint venture behind.
Today, the partners sleep in separate beds. The Detroiters are taking their final breaths. And the Chinese side does not appear to be in mourning.
So What
Are there implications for competition in America? You bet. Complacency can happen here in America, too. The Detroit 3 will continue to dominate the large pickup truck market for years to come. But they have withdrawn from the more affordable segments, convincing themselves that Americans do not want smaller cars anymore.
This retreat presents the Chinese automakers, the lowest-cost producers on the planet, with a mouth-watering opening. That’s dangerous for Detroit.
Ford, GM and Jeep are dead in China—even if their executives can't or won't admit it.
The Detroit 3 still possess vast resources, technology, ingenuity and smart people. But they better start hustling, taking risks, inventing and working harder than their Chinese competitors.
If not, they could face extinction – this time on their home turf.
Future Cars & Markets
Electrics
Geely’s Crowded Portfolio. Geely’s array of EV brands – Polestar, Volvo, Zeekr and Lotus – are living on top of one another. This is making investors have second thoughts about their value. Lotus shares are down 67% since their market debut two weeks ago. Link
Xiaomi’s March Launch. The world’s second largest cell phone maker will start selling its SU7 premium sedan on March 28th. Consumers outside of China will need to wait 2-3 years before they can buy one. Link
Mercedes Welcomes Chinese EVs Into Europe. “Don’t raise tariffs. Go the other way around. Take the tariffs that we have [in the EU] and reduce them.” This is the stance announced this week by Ola Kallenius, CEO of Mercedes-Benz. He says competition is a good thing for Europe. But he just might also be working to preserve Mercedes’ market access to China, its largest market. Oh, and Geely happens to be a major shareholder in Mercedes, too. Link
Batteries / Supply Chains
Lithium Price Recovery? After falling by a stunning 80% in 2023, there are signs that lithium carbonate prices in China may be recovering. But Goldman Sachs says a recent bounce should not be interpreted as the end of the bear market. Link
Koreans Into LFP. SK On says it is planning to mass produce LFP batteries as soon as 2026. Up until now, the LFP battery business has been totally dominated by Chinese battery makers. Link
Advanced Technologies
Pony.ai Goes Worldwide. Last week Pony.ai signed an agreement to establish an R&D center in the Grand Duchy of Luxembourg. This comes after forming a joint venture in South Korea and securing a $100 million investment from Saudi Arabia. In 2020, Toyota invested $400 million into Pony.ai through its China joint venture, Guangzhou Toyota. Link
NIO Humanoids. This is not a simulation. NIO has actually begun testing humanoids sourced from UBTech at its new factory. Link
New Numbers / Milestones
BYD: Brazil vs Europe. BYD had an underwhelming start in Europe, selling just 16,000 vehicles last year. Cross the Atlantic to Brazil and you find a totally different reality. BYD expects to deliver more than 100,000 cars in South America’s largest market. And the company is now renovating an idled Ford plant. Link
SAIC MG Fast Ramp in Europe. Europeans bought 239,000 SAIC MG vehicles in 2023, twice the number from the previous year. Competitive pricing and several powertrain options are the key drivers. Familiarity with the MG brand has been a huge asset, too. The MG ZS was Spain’s best-selling car in December, 2023. Link
VinFast Super Leasing Deal. Dealers in the US started leasing the VF8 at the incredibly attractive price of $249 per month in late January. Within weeks, all existing inventory was sold out. “At $249 a month, VinFast would be losing thousands of dollars a vehicle,” one dealer told me. Let’s watch what VinFast does next with its pricing. VinFast plans to appoint 100 dealers in America by the end of the year. Link
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