General Motors and Ford, the first and second largest US automakers had new plant inaugurations recently while the auto sales in China, the world’s largest auto market, are growing ever feebler.
If the car market in China crumbles and posts a decline at the end of the year for the first time in more than ten years, it could jeopardize the strategies at the two automakers as they relied on the region as one of the few remaining growth markets, believes consulting firm Alix Partners. The US carmakers were keen to expand their manufacturing footprint in the country in recent months in a desire to secure future long term prospects and now face a slowing market, according to a recent research study published by AlixPartners. The study also points out the companies need to mitigate the issue fast because even if auto sales stabilize and will post a positive result at the end of the year the carmakers would still be in trouble because of increased pricing pressure.
In less than a year China has morphed from the gold rush region for the auto industry to a regular, traditional market with ups and downs – slowing sales, pricing wars and other issues. “The growth rates are slowing down,” comments John Hoffecker, head of the firm’s global automotive practice. “The question is, what will happen to pricing and profits? China is a stronghold for GM and many others.” Ford last year increased its production output capacity in China by 30 percent last year, while larger rival augmented its own quota by 20 percent.