Key Points
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GM China peaked financially almost 10 years ago, but now the business is a liability.
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GM has restructured its Chinese operations multiple times to no avail.
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The Detroit automaker’s contract with joint venture SAIC-GM expires in 2027, and could be an intriguing moment.
- 10 stocks we like better than General Motors ›
The Detroit auto trio, General Motors (NYSE: GM), Ford Motor Company (NYSE: F), and Stellantis (NYSE: STLA), have much in common and generally have similar strategies across the globe. However, that hasn’t stopped GM from separating from the pack, as you can see in the graph below.
GM data by YCharts
GM’s stock has far outperformed its rivals thanks to strong cash flow driven by high-margin sales of internal combustion engine (ICE) full-size trucks and SUVS, huge share buybacks, and effective cost-cutting. Those factors all propelled GM to consistently beat earnings estimates, and Wall Street has rewarded it with a premium valuation compared to most mainstream automakers. GM isn’t perfect, however, and it’s worth noting its one big nagging problem: China.
What’s going on?
In the early 2000s, China seemed like the holy grail for Detroit automakers. The country boasted a blossoming middle class hungry for vehicles and transportation, domestic automakers were in their infancy, and consumers flocked to foreign brands. Foreign automakers were all too ready to accept forced joint ventures, which has now come back to bite them; domestic automakers gained knowledge and rapidly advanced into elite competition to get a piece of the growing pie.
General Motors peaked in China in 2017 with record sales topping 4 million vehicles, and financially, GM and its joint venture peaked a few years before in 2014. Since then, however, it’s essentially all been downhill, and it has cost the company a pretty penny. At the end of 2024 GM restructured its joint venture with SAIC Motor Corp in China with a price tag topping $5 billion in noncash charges and write-downs.
During the past decade, GM’s operations in China flipped into reverse, from a profit engine to a financial liability, but its 2024 restructuring gave investors hope that things could turn around. Although there was a bit of initial success, including a 23% rise in new-energy vehicles in 2025 compared to the prior year, things haven’t quite gone according to plan, requiring a second roughly $1 billion charge in the 2025 fourth quarter.
Worse yet, the most recent numbers out of the region are gloomy: GM’s China sales extended their slide during the second quarter, dropping 20% to 357,000 vehicles in the world’s largest automotive retail market. That marks the third year-over-year decline in consecutive quarters.
In fairness to GM, it doesn’t help that the region itself isn’t so hot currently, with China’s new car sales shrinking for nine consecutive months as of June. Year to date, China’s new car volume has declined 20% to 8.75 million, in part due to the government taxing electric vehicles (EVs) in January, amplified by increased electric vehicle demand amid the Iran conflict.
Now what?
The Detroit automaker’s SAIC-GM contract expiring in 2027. GM has unveiled a three-year electrification strategy to attempt to revive lagging sales, hoping that deploying more premium Buick and Cadillac EVs with locally developed software-defined interiors, as well as safety and suspension systems.
GM has also taken a page out of rival Ford’s playbook and made a strong push into turning China into an export hub. Ford has relied on its capital-light joint ventures with Changan Automobile and Jiangling Motors to offset its domestic sales slump and send tens of thousands of locally manufactured models across the globe. At the same time, Ford is also closely studying its Chinese partners and competitors, while slashing costs.
What it all means
Investors should watch GM’s latest iteration of a turnaround attempt in China, because it’s cost the company a pretty penny during the past decade and dinged earnings at times. Years ago, analysts warned Detroit automakers it might be wise to throw in the towel and give up on China entirely. GM’s impending contract expiration could give us an idea of how the next stretch of this battle will, or won’t, go, and because it’s one of the few knocks against a thriving automaker, savvy investors should keep it on their radars.
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Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.
