GM’s China Ambitions Threatened by Pollution

General Motors Co. (NYSE: GM) announced it will double down in China. Company president Dan Ammann said the manufacturer will release 60 new or updated models, with an emphasis on sport utility vehicles (SUVs) and the electronic connectivity drivers have started to expect as autos get stuffed with new hardware and software. GM’s greatest enemy in China may not be competition. It may be air pollution.

Ammann admitted the Chinese market may only grow at 3% to 5% over the next five years. That would put the growth rate slightly above that in America, but it is slower than the current rate in the European Union. However, China is the largest among the three, so global manufacturers have to make huge bets there.

Alerts that warn residents of China’s huge cities about air pollution risks get posted with increasing frequency. Many days, car traffic is cut in half by government restrictions.

The BBC recently interviewed Li Yan, head of Greenpeace in China:

Beijing’s extreme pollution and the ‘red alert’ are connected to China’s addiction to coal burning, and it’s very energy intensive way of industrial growth. Coal burning is the biggest single source of air pollution in China, and burning of coal, has for the first time in this century declined in 2014 compared to 2013.

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Even with progress, to make matters worse, a great deal of coal pollution is due to the number of homes that use it for heat and cooking. The culprit is larger than a few thousand factories. It is a few million homes. China cannot afford to close its factories and does not have the money or logistics to change the habits of a great portion of its population.

China is not the only country with an urban air pollution problem. Some cities in India register worse air quality. The solutions are the same, however. Cut the sources that can be cut. The most ready target is car travel.

Car companies in China need to tell their managements and investors that progress in unit sales will grow relentlessly. But that is not necessarily true if government solutions to air pollution become more imminent and the number of solutions remains tiny.