Bank of America recommends that the Big Three in Detroit exit China urgently

Shafaq News / Bank of America’s chief auto sector analyst, John Murphy, said on Tuesday that the traditional American automakers in Detroit – General Motors, Ford Motor Company and Stellantis – must exit the Chinese market “as soon as possible.”

The warning from Bank of America’s senior analyst comes amid unprecedented competition in China – the largest auto market in the world – and with China dramatically increasing car production for Chinese consumers as well as for global exports, which is known as surplus production capacity.

Murphy, who has previously called on GM to exit the Chinese market, said the “Detroit Big Three” automakers need to focus on their core products and the most profitable areas.

“I think you need to see the Detroit Three exit China as quickly as possible,” he said during a discussion of Bank of America’s annual “Auto Wars” report in suburban Detroit.

“China is no longer a core market for GM, Ford or Stellantis,” he added.

This prospect would have been considered unthinkable for automakers, especially GM, just a few years ago, but the rise of domestic Chinese automakers, such as BYD and Geely, has put increasing pressure on American companies.

GM’s share of the Chinese market, including its joint ventures, fell from about 15 percent in 2015 to 8.6 percent last year – the first time the share has fallen below 9 percent since 2003.

GM’s profits from operations there have fallen 78.5 percent since their peak in 2014, according to Wall Street regulatory filings.

GM executives believe they can improve their operations and regain market share in China, largely with the help of new electric vehicles.

There are also geopolitical risks and uncertainty for US companies operating in China, as US President Joe Biden announced last month that his administration would quadruple tariffs on Chinese electric vehicles.

Murphy said that while Detroit automakers must rethink the way they do business in China, the situation is a little different for Tesla, the leading American company in the field of electric cars.

Murphy explained that Tesla has an advantage in the cost of electric vehicle components amounting to about $17,000, compared to traditional automakers in Detroit, which helps the company in the Chinese market, and gives it “more room to move and maneuver.”

Shafaq.com