GM's China Writedown Won't Be the End of Its Problems.

Last week, the company told its shareholders that it was writing down the value of its Chinese venture by about $2.8 billion, and would take another $2.7 billion in equity losses as it tries to restructure the business.

The loss isn't an isolated incident. GM has experienced a persistent decline in China sales since 2017. In October, GM reported a loss of $137 million in China in the third quarter of 2024. GM CEO Mary Barra told investors that GM and its Chinese joint-venture partner, SAIC, are taking bold steps to ensure sustainable growth in China.

Restructuring may not be enough. Other companies, including Uber, have found the best way to reassure investors is to take China out of their long-term strategy entirely. If GM can't step up its strategy in China, the best way to reassure investors may simply be to exit China entirely.

Taking that irrevocable step would be a challenge for GM, which has spent decades attempting to master the Chinese automobile market. General Motors entered the Chinese market in 1997 through a joint venture with SAIC Motor, forming Shanghai GM. After Volkswagen's entry in 1984, GM was the second foreign car manufacturer permitted to produce vehicles locally in China.

In the early 2000s, GM's popular models such as the Buick Regal and Chevrolet Sail resonated well with Chinese consumers. Chinese executives favored Cadillacs. In 2010, GM sold over 2.35 million vehicles in China, surpassing its U.S. sales. China sales peaked at over 4 million vehicles in 2017 but have since declined. In 2023, GM sold 2.1 million vehicles in China.

Several factors contribute to GM's declining sales:

• Brand Image and OnStar Service: Initially seen as prestigious foreign brands known for quality and reliability; however, competition from German luxury brands diminished this image over time.
• Intense Price Competition: With incentives for electric vehicle purchases and a drop-off in combustion engine car sales impacting prices significantly.
• Geopolitical Tensions: Trade wars and governmental pushes for local self-reliance affecting consumer preferences away from U.S.-based goods like those from General Motors.

"A truly ambitious strategy would see GM attempt to strengthen partnerships beyond current ones," suggesting potential collaborations with companies like Xiaomi or adopting strategies similar to NIO's community engagement activities.

Pursuing New Strategies

• Enhanced EV Infotainment Systems:

"Seamless integration with smartphones is essential."