As competition in the Chinese market intensifies, foreign car manufacturers are facing various challenges in their business operations in China. In the first half of this year, American automaker General Motors (GM) reported a loss of $210 million in China, sparking concerns. Recently, there have been reports indicating that GM is adjusting its operations in China, including layoffs and reducing production capacity.
According to Bloomberg, sources revealed that the company is laying off employees in various departments related to the Chinese market, including research and development. In the coming weeks, GM and its Chinese partner SAIC Motor Corp will discuss potential cuts in production capacity as part of the strategy adjustment for American brands’ sales in China.
This reassessment represents a significant shift in GM’s strategy. In the world’s largest auto market, China, many foreign brands are combating a large number of Chinese competitors, while China is currently dealing with issues of massive overcapacity.
Insiders told Bloomberg that GM’s reorganization plan includes shifting towards producing electric vehicles and focusing on higher-end models. GM is considering reducing factory capacity and implementing more layoffs. Data on the company’s website shows that GM and its joint ventures in China employ over 58,000 staff members.
In the second quarter of this year, GM’s business in China reported a loss of $104 million, following a first-quarter loss of $106 million. The total loss in the first half of the year amounted to $210 million. GM had hoped to cut production in China in the first quarter to regain profitability.
GM and its joint ventures delivered 373,000 vehicles in China in the second quarter, a sharp 29% drop from the same period last year.
Delivery volumes for all of the company’s brands in China significantly declined: Buick delivered around 81,000 vehicles, lower than 136,000 in the same period last year; Chevrolet’s deliveries dropped from 48,000 to nearly 10,000 vehicles; Cadillac delivered around 29,000 vehicles, down from 55,000 in the same period last year.
In a recent securities filing, GM stated that local Chinese automakers are prioritizing market share over profits, making it challenging for GM to maintain sales volume. Therefore, the automotive giant expressed that it is collaborating with local partners to make adjustments to its business in China.
Bloomberg reports suggest that GM is unlikely to see its sales volume recover to the peak levels of 2017.
Data released by the China Passenger Car Association (CPCA) on July 8 showed that foreign car manufacturers are losing market share in China at a faster rate. In the first six months of this year, foreign brands accounted for 43% of China’s passenger car market, down from 50.5% in the same period last year.