Bank of America’s top automotive analyst, John Murphy, advised on Tuesday that traditional Detroit automakers—General Motors, Ford Motor, and Stellantis—should exit the Chinese market “as soon as they possibly can.”
Murphy’s warning comes in response to unprecedented competition in China, the world’s largest auto market, which has significantly increased vehicle production for both local consumers and global exports.
Murphy, who has previously questioned General Motors about leaving the market, emphasized that the “D3” automakers need to focus on their core products and more profitable regions.
“I think you have to see the D3 exit China as soon as they possibly can,” he said during an Automotive Press Association event discussing BofA’s annual “Car Wars” report in suburban Detroit. He added, “China is no longer core to GM, Ford, or Stellantis.”
This would have been unthinkable for these automakers, especially GM, just a few years ago. However, the rise of local Chinese automakers like BYD and Geely has increased pressure on these companies.
GM’s market share in China, including its joint ventures, has dropped from around 15% in 2015 to 8.6% last year—the first time it has fallen below 9% since 2003. GM’s earnings from Chinese operations have also declined by 78.5% since peaking in 2014, according to regulatory filings.
GM executives have expressed confidence in their ability to turn around operations and regain market share in China, largely through new electric vehicles.
Additionally, there are geopolitical risks and uncertainties for U.S. companies operating in China. Last month, President Joe Biden announced that his administration would quadruple tariffs on China-made electric vehicles.
Murphy noted that while Detroit automakers need to rethink their strategies in China, the situation is somewhat different for U.S. electric vehicle leader Tesla.
Murphy highlighted that Tesla has a roughly $17,000 cost advantage in EV components compared to traditional Detroit automakers, giving the company more flexibility in the Chinese market.
