According to foreign media reports, General Motors will incur two expenses and asset write offs totaling over $5 billion due to its business in China.
On December 4th, General Motors announced in a securities filing that it expects to write down the value of its joint venture in China by $2.9 billion. Prior to the announcement of the joint venture value write down, as of the end of 2023, General Motors valued its stake in its joint venture with SAIC Group at $6.4 billion. The downward adjustment of joint venture valuation indicates that General Motors' business in China is no longer as profitable as before.
Meanwhile, General Motors will also spend an additional $2.7 billion on closing factories and restructuring its business in China. It is reported that General Motors will close some of its factories in China and reduce unprofitable models.
The Chinese business is a high-quality asset for both our present and future. Our cooperation and communication with our joint venture partner SAIC Group are closer than ever to achieve profitability and sustainable development. To achieve long-term development goals, we are taking measures to reduce inventory, produce on demand, protect price systems, and lower fixed costs. "On December 5th, a staff member of General Motors China told the Daily Economic News reporter.
Data shows that General Motors has suffered losses in the Chinese market for three consecutive quarters, with a loss of approximately $347 million, compared to a profit of $353 million in the same period of 2023. In addition, American cars represented by General Motors have also been challenged by domestic brands in the end market performance of the Chinese market. According to data from the Passenger Car Market Information Joint Branch of the China Automobile Dealers Association, in October of this year, the market share of American cars was 4%, and in the first 10 months, the market share of American cars was 6.2%. In 2021, the market share of American cars was 9.6%.
However, General Motors has been seeking adjustments, and its joint venture in China has launched a "fixed price" sales policy for multiple models this year, which has to some extent driven the recovery of sales and performance.
According to data disclosed by General Motors, since the fourth quarter of this year, the company and its joint ventures have sold over 200000 new energy vehicles, with high-end models including the Buick GL8 Land Cruiser PHEV driving profit performance. With the continuous efforts in on-demand production and terminal sales, General Motors' profitability in China will be further optimized and boosted, "said General Motors.
New energy vehicles are becoming a strong driving force for General Motors' business development in China. With the launch of multiple best-selling products and the implementation of various cost reduction and efficiency improvement measures, we are steadily improving our profitability in the Chinese market, "said Steve Hill, Senior Vice President and President of General Motors China.
Based on relevant effective measures, our sales and market share have achieved sustained growth. In the third quarter of this year, General Motors' sales and market share in China both achieved quarter on quarter growth. Among them, sales of new energy vehicles, including pure electric and plug-in hybrid, exceeded those of gasoline vehicles for the first time. In November, we achieved month on month growth in sales for the fifth consecutive month. Since the beginning of this year, dealer inventory has decreased by more than 50%, helping the company better manage pricing and cost systems, "said the General Motors China staff member.
In addition, General Motors CEO Mary Barra said that the market environment in China is difficult, and General Motors can also try to make money in China through different ways in the future. For example, focusing on a new pickup truck and importing high-end cars.