Big 3’s challenges on rise in China
Detroit automakers are facing an uphill battle in China as technology proliferates the Asian market and President Donald Trump continues to up the ante on tariffs, says a one-time industry executive-turned-consultant.
General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV risk losing ground to Chinese companies in the race to the Auto 2.0 spaces of mobility autonomy and electrification — and in brand equity — as Chinese automakers and tech companies improve their products, Michael Dunne, CEO of Chinese automotive adviser ZoZo Go, said Monday.
Meantime, trade relations between the two countries remain strained as Trump sent the stock market spiraling Monday morning with a series of Sunday tweets threatening to increase tariffs on Chinese goods.
The Dow Jones Industrial Average plunged nearly 500 points in early trading Monday morning on the tariffs threat, but rebounded by the market close. Still, U.S. Trade Rep. Robert Lighthizer later in the day reaffirmed plans to raise tariffs to 25% from 10% on $200 billion in Chinese goods after China appeared to be backing away from previous trade commitments, the Wall Street Journal reported.
The rocky trade relationship between the U.S. and China is likely to be the new normal, according to Dunne: "The fundamental relationship has genuinely changed ... to a realistic sense that we’re different and we are competitors."
As a result, U.S. automakers are "vulnerable" in the world's largest automotive market. Even GM's "profit machine" in China is at risk as sales fell in 2018 — the first year-over-year decrease in at least a decade — and in the first quarter of 2019.
"Relying on building and selling cars is not going to get it done anymore, and they’re already feeling that pressure," Dunne, a former president of GM Indonesia, said at an Automotive Press Association event.
And China's reliance on global automakers is waning as the "Made in China 2025" effort that began in 2015 has spurred a new generation of technology companies, many of which already have operations in Silicon Valley competing with the likes of GM's autonomous-car unit, GM Cruise LLC. China's Big Three in technology — Baidu, Alibaba and Tencent — are aiming to lead on key technologies like autonomous vehicles, electric vehicles and connectivity.
In response to Trump's pressuring on trade, China last year proposed a path to full foreign ownership of automakers within five years, a move that theoretically could protect foreign automakers from requirements to share technology and know-how with would-be Chinese competitors.
The bright spot for U.S. automakers operating in China continues to be luxury brands. GM's Cadillac and Ford's Lincoln resonate with Chinese customers in a way that mass-market vehicles mostly do not.
Cadillac sold some 154,700 vehicles in the U.S. last year compared to 205,605 in China. Lincoln, which is hoping to continue strengthening its position in the Asian market, sold 55,315 vehicles in China last year compared to 103,587 vehicles in the U.S.
"The luxury market is almost its own market in China," Dunne said. "So either you go premium if you're (a Detroit automaker), or you're going to move to auto tech rather than conventional sedans or small SUVs."