GM may pivot to luxury to counter slump in China profits, Barra says

General Motors Co. is mulling a shift from mainstream models in China by focusing primarily on luxury vehicles as it struggles to bounce back from years of declining sales and profits in the world’s largest car market.

While GM still sees a role for itself in China’s increasingly competitive market, CEO Mary Barra said Thursday that the company has to reverse a downward trajectory in the country.

“When you look at Chinese market, it’s very different than it was five years ago,” Barra said at a conference held by Wolfe Research. “It’s a market that we want to play in appropriately, and I think it’s more at the premium and the high end.”

Barra’s comments follow her statements on an earnings call in late January signaling a reassessment of GM’s Chinese business, saying no options were “off the table.” A narrower product strategy in China would mark a big reversal for GM, which entered the market in 1997 to become only the second foreign brand to manufacture locally after Volkswagen Group.
 

The Detroit automaker grew rapidly in its first two decades in China via the Buick, Cadillac and Chevrolet brands, while earning $2 billion a year as recently as 2018. But last year, GM made only $446 million in China, down 34 percent. It expects to revert to a loss there this quarter as it adjusts production and inventory.

At the same time, GM’s market share in China topped 14 percent in 2017 but has since fallen by nearly half to 8.4 percent and its Chinese sales volumes in 2023 dropped below those in the U.S. for the first time since 2009.

“GM sales in China are down 50 percent from their 2017 peak,” said Michael Dunne, former president of GM Indonesia and CEO of consulting firm Dunne Insights. “Chevy and Buick no longer mean much to Chinese consumers. Cadillac is the last line of defense. For GM in China, it’s up or out.”

Part of GM’s problem in the market is that it’s catching up in electric-vehicle development.

BloombergNEF forecasts sales of plug-in vehicles to reach 38 percent of China’s auto market this year. Cadillac just started building the Lyriq EV in November and will start building the smaller Optiq and three-row Vistiq EVs later this year.

Buick has had inexpensive electric models in the market but just expanded its lineup with the Electra E5 crossover and Electra E4 coupe EVs. Both went on sale last summer, giving the brand two new EVs powered by GM’s Ultium battery pack. The company also has a third EV, the compact Velite 6, but like Cadillac derives most of its sales from gasoline-powered models.

Cadlillac is showing signs of improvement, John Roth, vice president of Global Cadillac, said in an interview. He said that brand started growing in January and is boosting sales in China again in February, thanks in part to the Lyriq.

“China needs to do well. We’ve got great plans,” Roth said. “I see no reason why we won’t see year-over-year growth.”

Barra said GM could still make money from China’s mass market with its ownership stake in the joint venture with its SAIC-GM-Wuling Automobile Co. partnership that it shares with SAIC Motor and Guangxi Auto. That partnership builds small vehicles and mini electric models that start for less than $10,000.

GM has a 44 percent stake in the JV, which now accounts for more than half its China sales.