General Motors announced to its shareholders it would be taking more than a $5 billion hit to its profit on Wednesday as it restructures its operations in China, which have been considerably weakened as manufacturers there invest more in electric/hybrid vehicles, causing the car sales of foreign automakers to drop significantly.
In the first nine months of the year, G.M. lost $347 million on its Chinese operations. During that period, its sales in the country fell nearly 20 percent, while its market share dropped to 6.8 percent, from 8.6 percent a year earlier and more than 15 percent in 2015.
Since 1997, G.M. and SAIC Motor, a state-owned company, have operated a 50-50 joint venture, SAIC-GM, based in Shanghai that produces and sells vehicles under several brand names, including Cadillac and Buick.
Automakers have lost market share to Chinese manufacturers over the last several years, electric and hybrid cars have come to make up more than half of all vehicles sold in China, the world’s largest vehicle market.
“We are focused on capital efficiency and cost discipline and have been working with SGM to turn around the business in China in order to be sustainable and profitable in the market,” the company said in a filing to the Securities and Exchange Commission. “We are close to finalizing our restructuring plan with our partner, and we expect our results in China in 2025 to show year-over-year improvement.”
In the regulatory filing, G.M. said that it would report an expense of $2.6 billion to $2.9 billion in the fourth quarter to reflect the reduction in the value of its investment in its Chinese joint venture. Another $2.7 billion expense, most of which will be recognized in the fourth quarter, will reflect G.M.’s share of the joint venture’s cost of restructuring measures.
The decline of G.M.’s business in China points to a wider trend of almost all foreign automakers there, including European, Japanese and South Korean companies, losing profit as expanding Chinese car companies like BYD and Geely introduce new models and slash prices. In addition, Chinese banks and local governments have provided low-cost loans, land and other incentives to locally owned automakers, enabling some to sell cars for less than they cost to produce.
Ford Motor has been working to streamline and reorganize its Chinese joint venture for several years, spending $881 million restructuring the business in the first nine months of 2024. Meanwhile, Volkswagen, an early entrant into the Chinese market and the top-selling automaker in the country for four decades, has seen its vehicle sales in China have drop more than 10 percent this year, contributing to other struggles as the automaker said it might have to close factories in its home country for the first time.
Last week, the German company said it was looking to sell stakes in operations in China’s northwestern Xinjiang region, where the authorities have been cracking down harshly on a predominantly Muslim ethnic group that lives there.
Now, many automakers like BYD and Geely are also exporting a growing number of cars to other countries in Asia, Europe and Latin America. This year, BYD has been a contender to pass Tesla as the world’s largest producer of electric cars, and may also surpass Ford to become the world’s sixth-largest automaker overall.
