China posing "major challenge" to foreign automakers
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Sarah Grillo/Axios
The world's biggest automakers are faltering in China.
Why it matters: China was once a source of significant sales growth for foreign automakers like Volkswagen, Toyota and General Motors.
The big picture: Increasingly, it's a place where domestic competition is posing serious challenges to their business.
- Volkswagen CEO Oliver Blume Thursday called China "a major challenge" for the company.
- Toyota said profit from its China ventures plunged 73% on lower sales volume and increased sales expenses.
- GM CEO Mary Barra said last week that the situation in China is "unsustainable" and the company is restructuring its business there.
Zoom in: Intense competition there — especially from surging and subsidized EV companies such as BYD — has led to excess production capacity and a price war.
- "Very few people are making money, and a lot of OEMs are prioritizing production over profitability," Barra said, adding that "the amount of companies losing money there cannot continue indefinitely."
- GM swung from a $75 million profit in China in the second quarter of 2023 to a $104 million loss in the second quarter of 2024.
The situation is particularly problematic for VW, which last year lost its post as China's best-selling automaker to BYD.
- Volkswagen's vehicle sales in China fell 6% in the first half of 2024, compared with a year earlier.
- China is so important to VW that Blume in April called it "our second home market" and vowed VW would be "pushing pioneering technologies, increasing cost efficiency, and deepening local partnerships."
Context: Over 30% of VW's sales came from China in the first half of this year. That's just slightly more than the 29% for GM, while 18.5% of global Toyota sales came from the country last year.
What they're saying: "With sales of non-Chinese brands there now dropping fast, Americans and Europeans feel that they must convert those plants to ship products to markets worldwide," China auto industry expert Michael Dunne wrote recently.
What to watch for: Dunne Thursday predicted that some automakers could exit China within months.
