GM Struggles to Navigate Red Ink in China

With losses piling up, General Motors is preparing to slim down its once-promising investment in China.

GM says it lost $104 million in China during the second quarter of 2024. The new shortfall follows a loss of $106 million in the first quarter and steadily diminishing profits during 2023 as the Chinese market moved to EVs and local brands, which have grown in power and prominence.

Mary Barra, GM chairman and CEO, says the automaker is not leaving China, but it is preparing to restructure its operations around Buick, which remains popular in the country, and the Wuling and Baojun brands, which were created with GM’s Chinese partners in 2010 to appeal to customers in the middle and lower end of the market.

“I think when we look at the strength of the Buick brand and the China brands, there’s a path forward in this market that we do believe over the course of the midterm is going to resume…growth. So that is our plan, and I’m not going to predict where we’re going to be exactly,” Barra says during a conference call with analysts.

“I will just tell you, we’re working aggressively to improve that situation and leverage what we have in (GM-Wuling),” she adds.

However, GM is bracing for more losses and preparing for a major restructuring of its operations in China.

 “We had expected to return to profitability in China in the second quarter,” Barra acknowledges. “However, we reported a loss, and we expect the rest of the year will remain challenging, because the headwinds are not easy.

“GM is working closely with our JV partners, which include Wuling and SAIC, one of China’s automotive giants, to restructure the business in what is now the world’s largest automotive market to make it profitable and sustainable,” she says.

Binguo BEV produced by GM joint venture with China’s SAIC and Wuling.

“As you know, the market has significant excess capacity, and many startups and established competitors continue to prioritize production over profitability. We have been taking steps to reduce our inventory, align our production to demand, protect our pricing and reduce fixed costs. But it's clear the steps we have taken, while significant, have not been enough,” the CEO admits.

GM entered the Chinese market in the early 1990s when it acquired a piece of a struggling truck company in northern China. It gradually expanded its operations, offering technical and design assistance, and with its Chinese partners in the early part of the 21^st century it was an integral part of the automotive boom in China.

Indeed, the success of GM’s Chinese ventures stood out among the automaker’s international operations, which included a long string of losses in Europe and South America and failed venture in central Asia. It also offered the century-old Buick brand a lifeline as GM passed through bankruptcy in 2008 and 2009 while brands such as Oldsmobile, Pontiac and Saturn were dropped. For historical reasons, Chinese customers favored Buick.

Accompanying the rise of China’s automotive industry and China’s economic power are political tensions that are being manifest in trade issues and tariffs, and are becoming more acute in the current presidential campaign in U.S. amid the transition to electric vehicles.

The European Union is now applying new, higher tariffs on EVs built in China by GM and its Chinese partners such as Wuling. GM also exports vehicles made in China to Mexico and Latin America.

Nonetheless, Bank of America’s top automotive analyst, John Murphy says GM, Ford and Stellantis should exit the Chinese market “as soon as they possibly can.”

But Barra says GM needs to merely trim its operations in China after years of growth.“I think what’s critical is, we’ve got to get…our structural cost right to the new realities of this market. And so…there’s a three-pronged strategy to execute the plan to align production to the current retail reality, get rid of the existing higher inventories and then aggressively reduce the structural cost,” she says.