Bank Of America Advises Detroit’s Big 3 To Leave China

  • BofA analysts suggest that the Detroit 3 should leave the Chinese market amidst rising home-grown competition.
  • It suggests that the focus should be on reducing EV component costs and focusing on profitable gas vehicles.
  • GM, Ford, And Stellantis so far seem committed to the Chinese market.

The Bank of America Securities’ latest annual Car Wars report sums up the industry’s current situation, with confusion over what powertrains to offer and a need to reduce EV costs highlighted. However, a warning from BofA Securities research analyst John Murphy may raise a few eyebrows in Detroit.

Murphey recommends that the Detroit three, which comprises Ford, General Motors, and Stellantis, exit China “as soon as possible.” On the face of it, the call may sound surprising, with the Chinese market typically being a crucial one, with over 22 million cars sold annually. However, thanks to increased competition from local players, imports are under more pressure than ever.

Read: China’s Auto Glut Seeks Global Escape

The meteoric rise of China’s homegrown breed of automakers has seen the likes of BYD, Geely, and SAIC all vie for a piece of the pie. Meanwhile, GM’s Chinese market share fell from 15 percent in 2015 to just 8.6 percent in 2023. CNBC reports that the company’s Chinese earnings fell from a high point in 2014 by 78.5 percent last year. There are further threats of retaliatory action from China in the face of the US’s increased EV tariffs.

Murphey suggests that the Detroit Three would be better served working on ways to make their EVs profitable while focusing on core models such as profitable fossil fuel-powered vehicles. He likened the suggestion to when GM sold off its European brands in 2017.

Last year, over 120 brands offered at least one EV, so competition is fierce. Competition is so intense that Chinese EV brand Aiways decided to leave its home market and instead focus on Europe. And although GM executives still think they can turn things around with new electric offerings, Murphey isn’t so sure.

Bank Of America Advises Detroit’s Big 3 To Leave China
Chinese-market Ford Mondeo Sport

Unlike a brand like Tesla, which has managed to get its component costs down, the Detroit Three doesn’t yet have the same pricing wiggle room. “There’s a $17,000 component cost delta, at least by our estimates, between Tesla and the incumbents on their EVs,” said Murphy.

Speaking to Auto News, Murphey went on to say, “There’s a tremendous amount of work for the incumbents to do to reduce their EV costs and remain competitive with Tesla.”

However, the big three are very much focused on the Chinese market. GM will focus on premium and luxury models, while Ford says it has been profitable and plans to grow its export business with the success of models such as the Mustang, Bronco, and F-150. And, although Stellantis has ceased building Jeeps in China, the company recently invested in Leapmotor, while also forming a joint venture to sell products internationally.

Bank Of America Advises Detroit’s Big 3 To Leave China
China-only Buick Regal sedan

The Auto World

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