The Chinese will gobble up third world markets, but will it be enough to sustain China and its workforce? To offset the western country markets that will block Chinese cars coming in from Mexico?
Bringing American auto technology to China included training employees in partnership with a local carmaker. Workers in Shanghai examined a Buick’s undercarriage in 1998.Credit…Greg Girard/Contact Press Images, for The New York Time
Keith Bradsher, who has covered General Motors’ China business since 2002, reported from Shanghai.
Dec. 19, 2024, 12:00 a.m. ET
General Motors was a pioneer in China, where for a quarter-century the company drew enormous profits and vied with Germany’s Volkswagen as the top seller of cars.
Those days are over.
G.M.’s sales in China have entered a death spiral, falling 42.5 percent in the first 11 months of this year. The company now ranks 16th by sales. The dizzying collapse of its China business forced G.M. to take a roughly $5 billion charge against profits this month.
It was a drastic comedown for the company, which started in China in 1996 with an initial investment of $350 million and went on to build a network of factories, churning out vehicles and sending billions in profits to its headquarters in Detroit.
G.M.’s early China executives were highly responsive to the unique characteristics of the market. They built bulky minivans with lots of sparkling chrome to appeal to leaders of the state-owned companies that were big customers. They sold Buicks, a faded brand in the United States that still had cachet in China. For rural farmers, G.M. offered vans and pickup trucks with flimsy seats and no air-conditioning that cost only $5,000.
In many ways, the story of G.M. in China tracks the experience of all foreign automakers in what is now the world’s largest car market.
China allowed foreign carmakers like G.M. into the country only as part of a publicly stated, long-term policy to gain technology and build its own globally competitive industry. Government leaders were also intent early on to shift away from cars that needed gasoline, which China mostly imports, and toward electric cars powered by energy sources at home like coal, solar and wind.
G.M. executives foresaw China’s strength, particularly in electric cars. “China is well positioned to lead in this,” David Tulauskas, an early G.M. director of China government policy, said in a 2009 interview.
But after years of success, G.M. has found it increasingly difficult to compete with Chinese rivals or adapt to the rise of electric cars.
Government policies that forced G.M. into joint ventures with Chinese companies meant that G.M. ended up teaching much of what it knew about car manufacturing to local rivals that now outsell it.
Since 2008, Beijing has collected taxes totaling more than 100 percent on large, imported cars and sport utility vehicles. The taxes are so high that G.M. does not even try to import some models, like the Cadillac Escalade. That full-size S.U.V. starts at $87,595 in the United States but costs $186,000 including tax in China, when purchased through an import agent.
Electric cars made in China face only a 13 percent tax.
In addition to wielding tax policy at foreign carmakers, Beijing limited or blocked government subsidies for cars built by foreign companies. Partly as a result, G.M. has not competed effectively in battery electric vehicles and plug-in hybrid cars. These models together accounted for 52.3 percent of the Chinese market in November, the China Passenger Car Association announced last week. That was up from 32.8 percent in January.
These fast-growing categories account for less than 20 percent of G.M. sales this year — while its sales of gasoline-powered cars have halved.
The Chinese market transformed much faster than anyone expected. The government’s target in 2017 was for one in five cars sold in 2025 not to run on gasoline or diesel.
G.M. declined to make any executives available for interviews for this article. The company provided a statement expressing optimism that its main operations in China, a joint venture with the state-owned SAIC Motor of Shanghai that makes Chevrolets, Buicks and Cadillacs, would return to health.
“G.M. is working closer than ever with our joint-venture partner SAIC to restore the business in China to make it profitable and sustainable,” the company said. SAIC did not respond to requests for comment.
The architect of G.M.’s early successes was Philip F. Murtaugh, an obscure middle manager who had grown up on an Ohio farm. He went straight from high school in 1973 to the General Motors Institute, a company-sponsored college in Flint, Mich., where students worked while also taking classes. Mr. Murtaugh toiled in a factory that stamped car body parts.
Working up the ranks, Mr. Murtaugh, who spoke no Chinese, was given a crucial role on the team that negotiated G.M.’s joint venture with SAIC. While the rest of the team went back to the United States, Mr. Murtaugh stayed in Shanghai to run the new business.
China’s car market was tiny — 400,000 cars were sold in 1998. Today that number is 27 million.
One early win for the joint venture was the Buick GL8 luxury minivan for corporate fleets. Introduced in 1999, it was designed to maximize interior space but was just small enough to avoid being categorized as a commercial vehicle and tagged with a yellow sticker on a fender. A quarter-century later, luxury-apartment parking lots in Beijing and Shanghai still have many of the latest GL8s.
Next came the Buick LaCrosse sedan. In the early 2000s, Chinese consumers developed a growing taste for car ownership. G.M. executives noticed that many of these buyers were hiring drivers and riding in the back seat. Collaborating with SAIC, G.M. designed a version of the LaCrosse with extra legroom for rear-seat passengers.
