Are we witnessing the story of the boy who cried wolf, again? Chinese automakers say they are coming to the U.S. and then, well, things go quiet.
It's tempting to think so. But not so fast.
In 2016, Chinese automakers and suppliers began invading global markets, investing tens of billion of dollars in acquisitions and greenfield operations.
Geely became the No. 1 shareholder in Daimler. Volvo, a Geely subsidiary, opened a factory in South Carolina. BYD built electric bus plants in California, Canada, Hungary and France. Top auto-tech companies including Baidu and Didi established r&d centers in Silicon Valley.
Today, that head-turning flood of investments has dwindled to a shallow stream.
Why the abrupt change?
First, Chinese automakers have a lot less money to spend as profits shrink in their home market.
Second, Chinese overseas investments are now subject to tighter scrutiny by host countries — especially the U.S.
Chinese companies need access to new markets because the years of easy growth and profits at home are over.
Demand for new cars in China has dropped 11 percent so far this year — close to 2 million vehicles. "It's the worst year ever in China," the COO at a global Tier 1 supplier told me in September.
Annual production capacity for light vehicles meanwhile, hovers above 34 million. Consider this: China's overcapacity is greater than the total plant capacity in the U.S.
In 2016, Chinese companies from all industries invested $47 billion total into the U.S. That number crumpled to just $4.6 billion last year, according to Rhodium, a New York research firm.
There have been no significant automotive investments during the past 12 months.
Without question, U.S.-China trade tensions and new investment rules enacted by the Committee on Foreign Investment in the United States are making things harder for Chinese investors.
"U.S.-China relations are the worst they have been in 40 years," said Susan Shirk, chairman of the 21st Century China Center at the University of California, San Diego and former assistant secretary of state in the Clinton administration.