LEAKED: GM Sees Overcapacity Fiasco in China, Hopes Americans Will Buy Lots of Chinese-Made Buicks
by Wolf Richter
WolfStreet.com
August 19, 2015
“We do not comment on future product speculation,” a Buick spokesman said, refusing to confirm the leaks, but didn’t deny them either.
GM sold 919,582 Buicks in China in 2014, four times as many as it sold in the US! GM manufactures in China nearly all vehicles it sells there. About half of GM’s earnings are generated in China. After having been bailed out of bankruptcy by US taxpayers to keep the manufacturing base in the US, GM bet big on China.
In July, GM announced that it would invest an additional $5 billion in China to develop a new family of Chevrolet vehicles with its Chinese partner SAIC. All global automakers have invested billions in China, year after year, to build new plants, add capacity, and increase production. More new plants are coming. More capacity is being added. It all worked out because automakers sold these vehicles in China as fast as they could make them.
Until this year. But now supply and capacity are still rising. Demand has started to fall. Inventories are piling up. A vicious price war has broken out. And the bane of the auto industry, overcapacity, is suddenly looming ominously above them all.
Overcapacity tore up the industry in the US. It tore up the industry in the EU. It’s a deadly disease for automakers. It led to bankruptcies and bailouts. And now it’s spreading in China.
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