It wasn't supposed to be like this.
When Western and other Asian car companies started moving into China in force in the 2000s and 2010s, they thought it would be a kind of golden goose that would lay its golden eggs forever.
By the middle of the decade, it had become the largest and most important market for nearly every automaker, whether they were big like General Motors or smaller and more niche like Porsche; by the end of that decade, it became the long-sought key to stability and sustained profits for Tesla. And it drove product decisions that many of us felt in the U.S., Europe and beyond, like the push toward an electric vehicle future driven by China's policies.
Not so anymore. Somehow, none of those "foreign" automakers counted on how quickly China's homegrown car companies would accelerate on their own. Now, the latest data shows how their bet on China has turned into a real money pit.
That kicks off this Monday edition of Critical Materials, our morning roundup of tech and transportation news, coming soon to your inbox. Sign up here if you want the latest dispatches in email form.
Also on tap today: some good news about EV sales in the U.S., with an asterisk, and a top labor leader is speaking at the Democratic National Convention this week in Chicago. Let's dig in.
30%: China Rises And Everybody Else Falls
Kudos to the Wall Street Journal for gathering so much data on sales and profits from joint ventures in China. But any way you want to look at the charts in that story, things are pretty bleak.
As has been reported extensively here and elsewhere, car buyers in China are turning pretty exclusively to homegrown Chinese brands, which have become more advanced in software and battery tech and are better suited to their individual tastes. I hope our friends at the Journal don't mind, but I'll borrow one such chart that shows how GM's profits from Chinese joint ventures are going:
No other way to say it: ouch.
This is especially tough when you consider how much the "foreign" automakers staked on China. The Volkswagen Group, and its namesake brand, have never had such a huge market share in the U.S., for example; not like it does in Europe and Latin America. Stellantis has some truck brands here, for the most part. And GM and Ford have largely absconded from Europe in recent years too.
So basically, if they lose China—and many of them have already—they're toast. Even Tesla, which helped send China's EV sector into overdrive, is getting a "thanks, but no thanks" from buyers these days.
It's bad, but hey, things can always get worse. From the story:
Chrysler owner Stellantis pulled out of manufacturing cars in China in 2022 after its JV that made Jeeps filed for bankruptcy. But it returned to the country a year later by buying a roughly 20% stake in Chinese EV startup Zhejiang Leapmotor Technology. Last month a new JV between the two companies shipped a first batch of Leapmotor EVs to Europe.
[...] Tesla’s share of revenue from China slipped to less than a fifth in the first half of 2024, down from more than a quarter at the 2021 peak.
Manufacturers from China’s Asian neighbors aren’t faring better, according to the latest results. Toyota’s Chinese JV income fell 73% in the quarter through June compared with the same period of 2023, while Honda’s equity income was all but wiped out.
“Global automakers in China still haven’t found a bottom,” said Tu Le, managing director of industry research firm Sino Auto Insights.
That, and they increasingly have to compete with China's automakers on their home turf, especially where the Europeans are concerned—or markets they though they'd own forever like Latin America.
Maybe the approach is "if you can't beat 'em, join 'em," like Stellantis is doing with Leapmotor. But that's surely now how these car companies envisioned the Chinese market playing out for them once.
60%: Yes, EV Sales Are Rising. But They're Still Heavily Driven By Incentives
Meanwhile in America, every day we see evidence that counters the "EV sales are down" headlines you read everywhere else. Let's take June's registrations. According to the latest from S&P Global Mobility, new EV registrations rose 3.1% year-over-year that month (the latest month where the full data was available) which doesn't sound like a lot until you realize the overall car market is down 8.8% since 2023.
Blame high interest rates, among other things.
The biggest concern to me isn't sales; it's how long these tax incentives, discounts and deals will exist that are clearly driving a lot of EV adoption. I'm certainly not convinced they'll stick around forever. Here's Automotive News with more:
"The June month numbers were good for EVs," said Kent Chiu, an analyst at S&P Global Mobility. "But behind them were pretty strong incentives as a motivator."
Discounts on some mainstream electric crossovers climbed as high as $18,000 per vehicle, a number unheard of for their gasoline and hybrid counterparts, according to data from Motor Intelligence. The average incentive on the Kia EV9 in June was $18,081, Motor Intelligence said.
Toyota's battery-electric bZ4x crossover had incentives of $11,761 on average in June, according to Motor Intelligence, while the similarly sized RAV4 had just $1,691 per vehicle. The RAV4 comes in gasoline and hybrid versions. Incentives on the electric Nissan Ariya crossover were $14,779 for the month versus $4,267 for the gas-powered Nissan Rogue, Motor Intelligence said.
Some of the incentive money comes indirectly through EV leasing, which allows finance companies to claim the $7,500 federal EV tax credit and pass some or all of it on to consumers. But automakers and their finance arms are not obligated to do so.
Another motivator for EV growth, that story says, is the sheer glut of new options available in 2024. Stuff like the Kia EV9, Chevy Blazer EV and Equinox EV and even Tesla Cybertruck weren't around last year.
"As more EVs come to market and occupy segments that match internal-combustion vehicles, there will be more consumers that switch over to the EV space," Chiu told the outlet.
But the deals probably aren't sustainable forever, so grab one while you can.
90%: UAW's Fain To Speak At The Democratic National Convention
Like it or not, EVs are now a source of considerable partisan bickering in the U.S. and beyond, with the two presidential candidates presenting stark differences in incentives around the policies that are driving their manufacturing and adoption.
I don't doubt we'll hear something about EVs this week as the Democratic National Convention kicks off in Chicago. That's especially true as United Auto Workers President Shawn Fain is set to speak at the convention today.
The UAW is reliably Democratic, even with huge member bases in swing or redder states like Michigan and Ohio, so the Harris campaign is hoping the union will help turn out the votes.
And in typical Fain fashion, he's not pulling punches. From the Detroit News:
Fain has emerged as a top voice for Democrats over the past year in the electoral battleground of Michigan and on the national stage after leading a historic, successful hourly worker strike against major automakers Ford Motor Co., General Motors Co. and Stellantis NV.
The UAW's executive board endorsed Vice President Kamala Harris, the Democratic presidential nominee, 10 days after President Joe Biden ended his reelection bid and Harris launched her campaign.
The Detroit-based union last week launched an operation among its members to mobilize support in Harris' favor, pledged $1.5 million to the Democratic National Committee and filed a federal labor complaint against Republican presidential nominee Donald Trump.
"I am very confident that Vice President Harris, as president, will have our back, just as she has as vice president," Fain told The Detroit News in a recent interview. "And I'm very confident that Donald Trump could care less about working-class people. He's a con man."
Meanwhile, Trump has seemed to soften somewhat on his anti-EV rhetoric, possibly thanks to his newfound support from Elon Musk. But we expect to hear much more from both sides as election season heats up.
100%: You Are Now In Charge Of A Major Global Automaker. What's Your China Strategy?
Congratulations! Due to your status as a prolific InsideEVs commenter, you have been deemed worthy of being named Senior Vice President, China Operations for a car company. Which car company? A major one.
The job will be great. You're gonna love it. All you have to do is reverse the total ass-kicking your company has taken there since about 2019 or so, despite almost two decades and billions of dollars in investments. Also, your former pals are now coming for your home market, if they aren't there already, but your problem is the more immediate one.
What do you do?
Contact the author: patrick.george@insideevs.com
