Collapsing China Car Sales Threaten Fate of US Manufacturers

By Douglas A. McIntyre Published Feb 26, 6:35AM EST

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Collapsing China Car Sales Threaten Fate of US Manufacturers — © courtesy of Ford Motor Co.

Car sales in China fell 18.7% in January. The spread of the coronavirus will make the figure much worse in February, and it could even drive them down by a third to as much as 50%. Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) rely heavily on China as a path to healthy global sales and earnings.

China became the world’s largest car market in 2009. Sales in the most populous nation in the world peaked at 28 million in 2016. The American market has supported sales of about 17 million for the past five years. The Chinese situation is so bad that it could put the United States into the position of market leader again. Initial estimates of China’s car sales through the first two weeks in February suggest this already may be true.

Global car companies, and domestic manufacturers in China, have operated under the assumption that the market share leaders take the positions as the largest carmakers in the world. GM and Volkswagen had an early lead in this battle. More recently, Honda, Nissan, Toyota and Hyundai have become significant players. Ford has lagged behind but has regularly commented on how important China is.

Even as the Chinese car market has fallen, both GM and Ford have disclosed troubling problems of their own. In 2019, GM’s sales fell 15.1% to 3,093,604. Matt Tsien, GM executive vice president and president of GM China, explained his plans, which are already a wreck. Talking about 2019, he said, “During the downturn, we are focused on bolstering our product lineup and improving cost efficiency to position our company for strong performance in China over the long term.”

Ford’s problems were much worse last year. Ford and its joint ventures in China sold 567,854 vehicles. This was a retreat of 26.1%. Some analysts believe that Ford’s prospects will never recover in China. The market is simply too competitive and Ford is too far behind the leaders. Its operating loss in China last year was $771 million.

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Many auto analysts believe that as the coronavirus spreads from country to county, people will begin to shy away from car dealership visits. So far, that has not happened anywhere other than China. However, even if the problem does not spread beyond its borders, a horrible downturn for Ford and GM could wreck their results for 2020.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.