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Detroit automakers General Motors<\/a> (GM), Ford and Stellantis should abandon the competitive Chinese market \u201cas soon as they possibly can\u201d and focus on the U.S., Bank of America<\/a> analysts believe. <\/p>\n \u201cWe think exiting China from a pure profit and strategic standpoint makes sense, to focus on where you\u2019re making money\u2014 which is North American trucks,\u201d John Murphy, BofA auto analyst, said on Tuesday per\u00a0The Detroit News<\/a><\/em> and CNBC<\/a>.<\/p>\n Thanks to a\u00a0longstanding history<\/a>\u00a0in China via its century-old Buick brand, GM once minted money in the nation during the 2010s, earning upwards of $2 billion annually at its peak when it sold 4 million vehicles.\u00a0<\/p>\n But the rising strength of homegrown rivals like BYD<\/a> and Geely mean volumes and profits are drying up. GM sales in China dropped to 2.1 million vehicles in 2023, and it posted a loss of $106 million in the past quarter\u2014only its third in 15 years<\/a>.\u00a0<\/p>\n The situation is even less appetizing at Ford and the former Chrysler group\u2014merged with France\u2019s Peugeot<\/a> Citroen\u2014now known as Stellantis<\/a>. The duo have thus far failed to carve out a sustainable and significant share of the local car market, the largest in the world with a record\u00a030 million vehicles<\/a>\u00a0sold last year.<\/p>\n As a result, Murphy argued financing losses in China going forward will sap the three carmakers dry. He added they should leave \u201cas soon as they can\u201d in order to redeploy their resources towards developing an EV line-up competitive with Elon Musk\u2019s Tesla<\/a>.<\/p>\n \u201cFocus on your core,\u201d Murphy said, speaking at an event organized by the Automotive Press Association where he presented the bank\u2019s annual Car Wars report. \u201cAnd China is no longer a core strategy to GM, Ford or Stellantis.\u201d<\/p>\n Fortune<\/em>\u00a0reached out to all three Detroit carmakers for a statement, but did not receive a comment by press time.\u00a0<\/p>\n Should all three decide to move out of China entirely, it would leave Musk\u2019s Tesla as the only remaining American car brand competitive in all three major global car markets, which also include North America and Europe.<\/p>\n Chinese carmakers have methodically put the squeeze on weaker western brands, largely by hiring European car designers to create stylish vehicles, built in state-of-the art factories staffed with lower-cost labor. Many brands also now have access to technology developed overseas\u2014either through joint venture transfers or the outright acquisition<\/a>\u00a0of western brands like Volvo<\/a>.\u00a0<\/p>\n Chinese consumers also have high expectations of their tech\u2014spending a vast amount of time and money on seamless apps like WeChat\u2014and so expect the same from their vehicles. <\/p>\n Indeed one of the reasons why the ID line of EVs sold by the Volkswagen<\/a> brand\u2014long the undisputed market leader in China\u2014disappointed<\/a>\u00a0when measured against expectations was a perceived poor value-for-money. This largely stemmed from its barebones infotainment system and substandard software when compared to rivals.\u00a0<\/p>\n On the other hand Tesla, which pioneered the concept of an electric vehicle capable of remote over-the-air updates, still remains competitive to this day by comparison\u2014even as its hardware, i.e. the cars themselves, are already considered ordinary by Chinese consumers. Additionally, with the sole exception of GM\u2019s Buick, Detroit brands like Ford and Chrysler had no heritage, no premium cache, and no technology. <\/p>\n But the recent deflationary downturn in China sparked by an\u00a0imploding real estate market<\/a>\u00a0lead to a\u00a0brutal price war<\/a>\u00a0that many western carmakers cannot or will not follow. It has even pushed homegrown brands to\u00a0seek their fortune abroad<\/a>\u00a0in healthier export markets.<\/p>\n Detroit\u2019s automakers need to make a choice\u2014do they still want to harbor global ambitions or do they want to cut into the substantial lead Musk\u2019s company enjoys on EV manufacturing costs?<\/p>\n \u201cIt\u2019s going to be mission critical to ultimately becoming competitive on a price and cost basis with Tesla,\u201d Murphy added. \u201cPushing volume at the moment and losing money doesn\u2019t make a tremendous amount of sense.\u201d<\/p>\n<\/div>\n\nDetroit cannot catch up to Tesla while still funding losses in China<\/h2>\n
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