Ford, GM see sales in China fall with another tough year ahead

Detroit two largest automakers say things might get worse before they improve in China, now the world's largest and potentially most-lucrative automotive market.

Ford Motor Co. reported Monday that sales in China fell 26% in 2019 as the company pushed to freshen an aging lineup with new vehicles catered toward Chinese buyers. Last week, General Motors Co. reported its sales dropped 15% in China.

Fiat Chrysler Automobiles NV has yet to report full-year China results for 2019, but it has a tiny share of the Chinese vehicle market — less than 1%. Its sales and earnings were down in Asian markets through the third quarter of the year due largely to its struggles in China.

Industry-wide vehicle sales in China are expected to have dropped around 8% in 2019, which comes amid an ongoing trade war between the U.S. and China, a slowing Chinese economy, and growing demand for models the U.S. brands are just now launching, according to LMC Automotive.

"The market is going through a bit of a transition," said Jeff Schuster, industry analyst with LMC. "The economy was moving at an unsustainable pace. China is maturing. We've stopped labeling China as an emerging market for that reason. It's still growing, it's just not what it was previously. The future looks brighter than 2019 did."

While GM sold five times as many vehicles as Ford in China last year — 3.1 million vehicles to Ford's 568,000 — executives from both automakers have said the industry will continue to battle "downward trends" due to a slowing economy and global trade tensions there in 2020. But experts say the market is too important for automakers to give up, and new strategies from both could pay off as the market corrects.

The general slowdown in China’s economy, caused in part by the U.S. tariffs on Chinese goods, has affected U.S. automakers selling there, said Matt DeLorenzo, senior managing editor for Kelley Blue Book.

“Most of the downturn has been felt in the mass market,” he said. “The luxury market is least affected by it.”

GM's luxury brand Cadillac, for example, still saw a 3.9% sales increase for the year of 2019.The Chinese market provides “some additional sales that could be the difference of making money or going broke,” he said.

Michael Dunne, CEO of Chinese automotive adviser ZoZo Go, said Ford and GM might have to sacrifice sales volume in order to succeed with their luxury models in China. It's no longer good enough to build a bunch of unremarkable sedans to drive profit in China.

"You can thrive and grow and be highly profitable provided that you're differentiated on the high end," Dunne said. "The premium segment was up last year. It's almost a market in itself."

Said Dunne: "There is pressure on automakers, the likes of which no one has seen in China. They've really got to work hard at differentiating themselves."

The answer to growth, Ford and GM hope, lies in a fresh product lineup that can offer the luxury sought by some of China's most affluent buyers, and other more approachable models for the growing middle class.

Although 2020 is expected to be another tough year, Anning Chen, president and CEO of Ford Greater China, said the company will work to strengthen its lineup "with more customer-centric products and customer experiences to mitigate the external pressure and improve dealers’ profitability."

Said Matt Tsien, president of GM China, in a statement: "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. We expect the market downturn to continue in 2020, and anticipate ongoing headwinds in our China business."

Other automakers are experiencing the same tightening market conditions in China as the Detroit Three, experts have said, but not all are hurting quite as much. Toyota Motor Co. and Honda Motor Co. had sales increases last year.

GM and Ford face different circumstances in the market, Schuster said. GM started selling vehicles in China years before Ford, and has a more established business there as a result. Since CEO Jim Hackett became Ford CEO in 2017, it has been overhauling what was a newer business there. GM has also seen success for its Buick and Cadillac brands that Ford hasn't seen for Lincoln until the last quarter of 2019.

GM introduced 20 new or refreshed models in China last year. The automaker plans to continue launching new SUVs, vans and electric vehicles that target the popular Chinese segments and adhere to government emissions and alternative fuel mandates, the automaker has said.

Ford, meantime, is pruning old sedans in favor of new SUVs and other utility vehicles. The automaker is also leaning on Lincoln. The automaker sales surge for some models last year, like the Lincoln Navigator, or the MKC and Nautilus. 

The Chinese market has given a much-needed shot in the arm to GM's Buick brand as well as Ford's Lincoln brand, DeLorenzo said. Schuster said more targeted lineups that cater to Chinese customers could set up the automakers best in a market where they must succeed.

"It's the largest market in the world," Schuster said. "It's an extremely important market with a growing consumer base. You have a growing middle class and growing consumer as they come up through the economy. In China, a vehicle and vehicle ownership is a considerable status symbol. As that continues, you want to take part in that."

ithibodeau@detroitnews.com

Twitter: @Ian_Thibodeau

Detroit News staff writer Kalea Hall contributed