Tesla Beats Ford and GM at Their Own Game in China

Cars and Drivers

Published: January 7, 2020 6:50 am

Last Updated: January 30, 2020 11:31 am

As is true with both major car companies and niche manufacturers, China is the future. It was supposed to be not only the largest market but one that would grow rapidly for years. The United States and Europe would be eclipsed in their importance. However, the growth in China has reversed. Many of the world’s largest car companies are in trouble there. At the same time, it appears that Tesla Inc. (NASDAQ: TLSA) is an emerging winner. It was not supposed to be.

Ford Motor Co. (NYSE: F) and its China partners posted a 30% drop in unit sales to 131,060 during the third quarter. General Motors Co. (NYSE: GM) reported 2019 full-year China sales down 15% to just over 3 million units. GM is the second-largest foreign car company in China. The problems of these two car companies come from model lineups that are not just unpopular but unlikely to be replaced quickly enough with new vehicles to change results this year.

Tesla is not only selling cars in China; it is making them there. Elon Musk has even said he will create a car for the Chinese market, and perhaps export it, something none of the large car companies has done. Another advantage for Musk is that making cars in China means it will not have to pay tariffs. That will become more important if the trade war between China and the United States worsens.

While there is skepticism about Tesla’s China future, optimism otherwise has driven the stock to another all-time high. Tesla’s market value is almost equal that of GM and Ford combined. One reason is that Tesla was not expected to sell several hundred thousand cars in the United States, ever. That forecast has been proven wrong.

Tesla’s success continues to be a miracle for some industry experts. It was supposed to be too small to beat large car companies with big balance sheets and dealer networks. That turned out to be untrue in the United States. The first indications are that it will not be true in China either.

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