US carmakers to suffer from trade row
Long-term impact seen for Ford, GM in China: analysts
An escalating trade conflict between China and the US could cloud the prospects of US carmakers in the Chinese market, with sales and long-term operations expected to suffer from the fallout of the trade friction, further exacerbating troubles for US auto companies.
US auto giants Ford Motor Co and General Motors Co are already under serious pressure in China, where growth is shrinking and competition is intensifying, and the US’ trade protectionist moves could damper the two companies’ strategies to climb back, analysts said on Sunday.
In the first half of 2018, Ford saw its worst sales performance in China since 2001, after sales dropped 25 percent year-on-year to 400,443 units, according to data released from the company on July 6. In June, sales in China declined 38 percent year-on-year to 62,057 units.
While GM had a better performance in China during the same period, it also saw slowing sales growth. In the first half, GM delivered more than 1.8 million cars in China, up 4.4 percent, according to the company. But sales growth slowed to 0.7 percent in the second quarter.
While the two US carmakers’ firsthalf woes might have to do with their own strategic errors and slowing overall growth in the Chinese market, the escalating trade conflict between the world’s two largest economies could pose serious challenges going forward, analysts said.
“In the second half, many brands under Ford and GM will be affected, including Ford’s Lincoln and GM’s Cadillac, as well as their core parts from the US,” Mei Songlin, vice president and managing director of China operations at JD Power, told the Global Times on Sunday, pointing to China’s tariff on cars and auto parts from the US. In response to the US’ 25 percen on $34 billion worth of Chinese goods China has levied a 25 percent on car and auto parts imported from the US starting on July 6.
While Ford and GM produce th vast majority of the cars they sell in China within the country, they impor certain models from the US.
Such levies could cost millions o dollars for US companies, includin Tesla Inc, Ford and Fiat Chrysler, which sell US-made cars in the Chinese mar ket, CNBC reported, citing analysts a investment firm Evercore ISI.
The analysts estimated that the im pact of Chinese tariffs on Ford, which is expected to sell about 19,000 US made cars in China in 2018, could to tal $151 million, while Tesla and Fia Chrysler could lose $507 million an $80 million, respectively. GM is no expected to export any cars to China in 2018, according to Evercore.
“With the tariffs, companies fac a tough dilemma – whether to rais
“US car companies have to have the Chinese market, but China does not depend on US car companies.” Wang Xin Expert at auto industry information website Auto Prophet
prices. If they raise prices, it will drive down sales; but if they don’t, profits will shrink,” Mei said.
Ford and GM had not responded to requests for comments as of press time on Sunday.
Experts noted that US carmakers could also face other challenges as a result of the trade conflict such as delayed customs clearance for cars and parts.
Given tense Sino-US relations, US carmakers’ cooperation with Chinese
partners could also be undermined, which could be detrimental for them, said Wang Xin, an expert with the auto industry information website Auto Prophet.
“US car companies have to have the Chinese market, but China does not depend on US car companies,” Wang told the Global Times Sunday, noting Chinese companies could look for European partners for future cooperation.
He pointed out that “as a signal to the US,” during a recent trip by Chinese Premier Li Keqiang, China and Germany signed more than 10 deals in the auto industry that are valued at billions of dollars.
“The US’ actions affect more than just the US and China, they also affect the entire global auto industry. Not only will the US not gain anything from it, it could have much larger impact on its own,” Wang said, noting that China’s sales of US-made BMWs and Mercedes cars could be hurt.