For much of this year, we've been covering the rise of the Chinese auto industry as primarily a problem for the European auto industry. Every car company has lost sales in their biggest market as the local competition got better and better, but Volkswagen and others have to do battle with BYD, MG and the rest on their own turf. Tariffs here in the U.S. have kept that problem away from our shores. But car companies are global operators, and if you want an example of how intense this challenge is, look no further than General Motors.
That kicks off this midweek edition of Critical Materials, our morning roundup of auto industry and technology news. Also on our agenda today: how Stellantis' CEO got fed up and quit after basically making enemies with everyone, and Hyundai gets ready for an Android Automotive shift.
30%: GM's Painfully Big Hit In China
China was like a giant money-printer for GM for more than a decade. When the country's modern economic boom really started kicking off in force, a newly empowered generation of buyers fell in love with cars from the American automaker, Buick in particular. For a while, it seemed like GM could see almost endless growth in the world's biggest car market, aided (and for a while, legally mandated) by a range of joint ventures with local automakers.
That was then. Now, Chinese drivers want Chinese cars, in large part because their electric vehicle and plug-in hybrid technology far surpasses what the rest of the world can do. GM sales have been plummeting in China for years and the entire operation now needs restructuring. The cost of that is more than $5 billion. Automotive News explains:
GM said in a Dec. 4 regulatory filing that it will take noncash charges of $2.7 billion for the restructuring and $2.6 billion to $2.9 billion to account for the diminished value of its equity in the 50-50 joint venture with SAIC Motor Corp. The charges will affect GM’s net income primarily in the fourth quarter and will be reported as one-time special items.
GM said in the filing that its board of directors’ audit committee determined Dec. 2 that the impairment was necessary “based on a determination that a material loss in value of our investments in certain of the China JVs is other than temporary in light of the finalization of a new business forecast and certain restructuring actions that SGM is finalizing that are expected to be taken to address market challenges and competitive conditions.”
GM has lost money in China for three consecutive quarters, with its sales in the country falling 18 percent in the first nine months of the year to 1.2 million vehicles. SAIC-GM, which builds Chevrolet, Buick and Cadillac vehicles, is one of two joint ventures for the automaker in China.
I don't think I need to explain how much $5 billion is a lot of money, but just in case, let's put that write-down into perspective a bit. GM's global net income before taxes in 2023 was $12.4 billion. Its profits in Q3 of this year before taxes was $4.1 billion. It is projecting pre-tax annual profits of between $14 billion and $15 billion for 2024.
So this loss was basically like wiping out a quarter of profits, not just revenue, and then some, or more than a third of its profits from 2023. There's no other way to put this: ouch.
As I mentioned, GM is hardly alone in its China problems. Volkswagen had success there for decades and it's got similar troubles now. Nissan is basically throwing in the towel in China and even mighty Toyota is getting hammered there. Even Tesla has intense competition in China after kickstarting the modern EV market, and while it's held the line better than most, it can't fend off that much heat forever.
As that story notes, GM CEO Mary Barra in October promised "a significant reduction in dealer inventory and modest improvements in sales and share" for China, which is a nice way of saying everybody just needs to lower their expectations from now on. And that portends bad omens for GM's future bottom line.
60%: 'You Cannot Make Enemies With Everybody'
As I noted in Monday's Critical Materials, nobody seems sad to see Stellantis' Carlos Tavares abruptly quit his CEO role well ahead of his scheduled 2026 retirement. But that's pretty much the problem in a nutshell.
Reuters has a great deep-dive into what led Tavares to quit, and the biggest factor was reportedly his disputes with the Stellantis board and his total lack of allies in the auto sector. By the end, the board didn't agree with his strategies, and the dealers, suppliers, unions and even customers were fed up with him as well.
If you've ever been in any kind of professional leadership role, you know that playing the politician can be an important part of what you do. And when you don't have any friends left, it's time to go. From that story:
On Sunday, Senior Independent Director Henri de Castries said in a statement that differing views emerged in recent weeks among the CEO, major shareholders and the board.
In November, however, Tavares' brash style led to a "totally untenable" relationship with the board, whose members represent major shareholders Exor, the Peugeot family and the French government, the other source said.
When board members started asking more specific questions about the executive's strategies, the person said, "Tavares' reaction was: 'You do not interfere with my job—that is not your business.'"Board members, irritated, continued pressing Tavares, the source said. They were unsettled by what they viewed as the CEO's relentless but narrow focus on cost-cutting, which had caused supply disruptions and angered dealers. Those problems had been overlooked in previous years, when Stellantis was hitting double-digit profit margins.
Now those and other issues were causing angst across the sprawling company, as Tavares tangled with dealers, unions, suppliers and governments - and now board members
"You cannot make enemies with everybody," the person said.
Tavares was renowned in the industry for his cost-cutting skills but not so much for his people skills. Now, Stellantis—which includes 14 brands that operate globally—faces a very uncertain future at a time when it should have had a viable plan years ago.
90%: Hyundai Leans Into Android Automotive
Speaking of automakers with a plan: you can't deny that Hyundai Motor Group is doing pretty well at the moment. Its EVs are popping off and it's executing hard on hybrids too at a time when GM, for example, is scrambling to figure out where it put the "How to engineer a Chevy Volt" manual. But as a Kia EV6 owner myself, I'd say that Hyundai's overall software game isn't where it needs to be yet. Over-the-air updates, navigation and integrated apps just aren't as world-class as the powertrains are.
But there's light at the end of the tunnel and it comes from Google. Hyundai's upcoming cars, starting with the next-generation Ioniq 5 (not the 2025 one with NACS, but whatever's next) will be the first to use Android Automotive. That's the system used by GM, Volvo and a few others, and it comes with full Google integration for Google Maps and other services; I'm a big fan of this system and think it's among the best out there now.
Hyundai dropped that tidbit in its Investor Day event in October but it didn't get a ton of traction until Korean Car Blog pointed it out the other day:
The next-generation IONIQ 5 (known internally as NE2) will operate on an Android-based operating system, introducing a larger and more advanced center screen to host Google Maps. This move underscores Hyundai’s dedication to delivering state-of-the-art technology to its customers.
Google Maps offers exceptional features, including precise navigation, real-time traffic updates, and a vast database of searchable locations. Hyundai’s decision to integrate this platform aligns with its goal of providing drivers with a more seamless and efficient driving experience.
The rollout of mass-produced vehicles is scheduled for 2026. Initial sales will target the U.S., with production at Hyundai’s Meta Plant in America, before expanding to other regions.
I hope this spreads across the board. An update to my car is unlikely, but if I could use Google Maps all of the time instead of the EV6's native navigation, I'd be over the moon.
100%: Who Makes The Best Automotive Software Right Now?
Let's turn away from Tavares (who, after making $39 million a year, is probably gonna chill on a yacht for the rest of his life) and China woes to talk tech. We're almost done with 2024 and a ton of new EVs hit the market this year. Which company is doing software the best, and is that influencing your purchasing decisions at all?
Also: the answer is "Apple and Google," right?
Contact the author: patrick.george@insideevs.com
