US carmakers may pull out of China

Ford, General Motors and Jeep's parent company could exit the world's largest auto market because the transition to electric vehicles is too costly.

The exit will happen as soon as possible, according to Bank of America Securities analyst John Murphy. The cost of making electric cars is the main reason.

The prediction comes amid talk of drastic cost-cutting measures that major automakers will have to take to compete with electric carmakers, like Tesla, as well as foreign automakers.

Workers at the production line of the SAIC-GM-Wuling joint venture plant in Liuzhou, Guangxi province, in May. Photo: Xinhua

To address slower-than-expected electric vehicle sales, Ford , General Motors (GM), and Stellantis (the parent company of Jeep, Dodge, Ram, Chrysler) have focused on cutting costs across all their business segments. The Big Three are also likely to take more drastic measures to reduce spending, Murphy warned, especially in their gasoline-vehicle operations. These measures, Murphy called “bitter medicine,” are a “cure-all.”

Meanwhile, China—the world’s largest auto market—has not been a promising land for many foreign automakers, especially in recent years, so it’s difficult to overcome the strength of Chinese companies in their home market, Murphy and other analysts note.

Chinese customer loyalty to domestic brands is also strong, and could grow even stronger after the US imposed steep tariffs on Chinese electric vehicles.

Sales for Ford and GM in China have fallen dramatically over the past decade. The region was once GM’s biggest market. In the 2010s, GM earned $2 billion a year with sales peaking at 4 million vehicles.

But now the American company is struggling to make a profit. Its sales in this market are expected to fall to 2.1 million vehicles in 2023, and it lost $106 million in the first quarter.

Ford - facing fierce competition from rivals such as BYD and Geely - is shifting its business in China to become an export hub.

If the trio decides to completely withdraw from China, Tesla will be the only American car brand competing in all three major global markets: China, North America and Europe.

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