U.S. carmakers to suffer from trade row with Ford, GM seen long-term impact: analysts
An escalating trade conflict between China and the U.S. could cloud the prospects of U.S. carmakers in the Chinese market, with sales and long-term operations expected to suffer from the fallout of the trade friction, further exacerbating troubles for U.S. auto companies.
U.S. auto giants Ford Motor Co and General Motors Co are already under serious pressure in China, where growth is shrinking and competition is intensifying, and the U.S.' trade protectionist moves could damper the two companies' strategies to climb back, analysts said on Sunday.
In the first half of 2018, Ford saw its worst sales performance in China since 2001, after sales dropped 25 percent year-on-year to 400,443 units, according to data released from the company on July 6. In June, sales in China declined 38 percent year-on-year to 62,057 units.
While GM had a better performance in China during the same period, it also saw slowing sales growth. In the first half, GM delivered more than 1.8 million cars in China, up 4.4 percent, according to the company. But sales growth slowed to 0.7 percent in the second quarter.
While the two U.S. carmakers' first-half woes might have to do with their own strategic errors and slowing overall growth in the Chinese market, the escalating trade conflict between the world's two largest economies could pose serious challenges going forward, analysts said.
"In the second half, many brands under Ford and GM will be affected, including Ford's Lincoln and GM's Cadillac, as well as their core parts from the U.S.," Mei Songlin, vice president and managing director of China operations at JD Power, told the Global Times on Sunday, pointing to China's tariff on cars and auto parts from the U.S..
In response to the U.S.' 25 percent on $34 billion worth of Chinese goods, China has levied a 25 percent on cars and auto parts imported from the U.S., starting on July 6.
While Ford and GM produce the vast majority of the cars they sell in China within the country, they import certain models from the U.S..
Such levies could cost millions of dollars for U.S. companies, including Tesla Inc, Ford and Fiat Chrysler, which sell U.S.-made cars in the Chinese market, CNBC reported, citing analysts at investment firm Evercore ISI.
The analysts estimated that the impact of Chinese tariffs on Ford, which is expected to sell about 19,000 U.S.-made cars in China in 2018, could total $151 million, while Tesla and Fiat Chrysler could lose $507 million and $80 million, respectively. GM is not expected to export any cars to China in 2018, according to Evercore.
"With the tariffs, companies face a tough dilemma - whether to raise prices. If they raise prices, it will drive down sales; but if they don't, profits will shrink," Mei said.
Ford and GM had not responded to requests for comments as of press time on Sunday.
Experts noted that U.S. carmakers could also face other challenges as a result of the trade conflict such as delayed customs clearance for cars and parts.
Given tense Sino-U.S. relations, U.S. carmakers' cooperation with Chinese partners could also be undermined, which could be detrimental for them, said Wang Xin, an expert with the auto industry information website Auto Prophet.
"U.S. car companies have to have the Chinese market, but China does not depend on U.S. car companies," Wang told the Global Times Sunday, noting Chinese companies could look for European partners for future cooperation.
He pointed out that "as a signal to the U.S.," during a recent trip by Chinese Premier Li Keqiang, China and Germany signed more than 10 deals in the auto industry that are valued at billions of dollars.
"The U.S.' actions affect more than just the U.S. and China, they also affect the entire global auto industry. Not only will the U.S. not gain anything from it, it could have much larger impact on its own," Wang said, noting that China's sales of U.S.-made BMWs and Mercedes cars could be hurt.
