Plunge in China Car Sales Threatens GM and Ford

By Douglas A. McIntyre Published Apr 11, 8:16AM EDT

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Plunge in China Car Sales Threatens GM and Ford — © trangiap / Getty Images

China was the future of the car sales industry. In 2009, China surpassed the United States as the largest car market in the world. In 2017, sales there topped 27.2 million, while the United States posted sales of 17 million that year. The United States would hold at that level until last year. Sales in China fell to 21.4 million in 2019. This year, they have cratered, down 43.3% in March to 1.43 million. General Motors Corp. (NYSE: GM | GM Price Prediction) and Ford Motor Co. (NYSE: F) had staked much of their future on the market.

Every major car company in the world counted China as its largest potential market. Car sales have crashed across the world due to the spreading pandemic. GM and Ford have idled factories. Each has made the strategic decision to make preserving cash as their major goal.

GM and Ford were already in trouble in China last year. GM and its local partners have the second-largest share of the Chinese market, behind Volkswagen. GM posted total 2019 sales of 3.1 million, down 15%. Ford’s situation was worse. Its sales dropped 26.1% for the same period to 567,854. Each company said it has poor product mixes for the Chinese market. Neither expects a short-term improvement.

China adds to the trouble in GM and Ford’s home market. U.S. sales are expected to drop by 20% or more in the second quarter. That means the two companies have nowhere to go to improve their fortunes.

The stock prices of the two companies tell the tale of their troubles. GM’s stock is off 34% year to date, and Ford’s is down 42%. Ford has suspended its dividend. The payout is particularly important to the Ford family, which still runs the company.

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China’s car sales may recover in the second quarter, as the spread of the coronavirus has slowed there. However, the sales at these two auto companies will still erode throughout the year. Neither will improve market share, however the overall market goes.

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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.