(RightWing.org) – A top industry analyst has said the Big Three US car makers should pull out of China. The warning comes as Chinese electric vehicle (EV) manufacturers push hard to grab market share in the West. Already under pressure, the US companies will need to cut costs — and wasting resources trying to fight Chinese makers on their own ground is a luxury they can’t afford, according to the expert.
On June 18, John Murphy, a securities analyst with the Bank of America, delivered his annual “Car Wars” report on the automotive industry. He focused on the Big Three manufacturers — Ford, GM, and Stellantis — and their operations in China. As China’s middle class has grown, many Western car makers have opened factories there to supply the emerging market.
Now, though, China’s own car companies, focused on making EVs, aren’t just dominating at home; they’re starting to flood the US and other Western countries with cheap, battery-powered vehicles. The Big Three are trying to expand into China at the very moment China is threatening their survival at home.
According to Murphy, faced with the rise of budget Chinese cars, the Big Three need to “very aggressively manage [their] core business” — and he left no doubt what that core business was. The Biden administration is pushing Americans to switch to EVs, but the truth is that short-range and inadequate charging infrastructure mean they’re just not practical for most people.
Sales are already struggling as the EV sector runs out of early adopters and ordinary drivers stick with gasoline-powered engines; traditional vehicles still generate most of Detroit’s profits. Murphy says the Big Three need to focus on cutting costs on their gas-powered vehicles — especially trucks — until they can make EVs as profitably as Tesla and the rising Chinese makers.
Ten years ago China was GM’s biggest market, but now it’s barely making a profit there. Ford is already giving up on selling cars to the Chinese and is turning its business there into an exporter to the rest of Asia. If Murphy’s right, even that might not be enough; it could be time to pull out completely.
Copyright 2024, RightWing.org
