Chinese drivers love Buicks, and that’s why GM is concerned about their economy

In China, few things say luxury like driving a Buick. That’s right, General Motors’ brand Buick. 

General Motors sold nearly 920,000 Buicks in China last year, four times as many as in the US. Buick offers more lines of cars and SUVs — even minvans — than it does here in the US. Some sell for as much as $60,000. This ad from China shows you what you need to know. 

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This aggressive sales and marketing strategy makes sense — China is the world’s biggest auto market. Until the current slowdown, Chinese consumers were on pace to buy 24 million automobiles this year, seven million more than in the US. That gap should increase even more in 2020.

“It looks like it (China) should be about a 30 million unit market, where the US market will sort of hold off about where we’re at,” says Stephanie Brinley, a senior analyst in Michigan with IHS Automotive.

Currently, GM sells almost a quarter of its vehicles in China. For Ford that figure is 16 percent. Fiat Chrysler is still a bit player there, but is trying to get in on the action.  

If Detroit’s automakers are worried about the latest turmoil in China, they’re not letting on. Tom Henderson with GM’s finance team sent me a brief email saying, “We expect a more volatile market in China as growth moderates. Our long-term view of China hasn’t changed. We continue to believe the market will grow.” Ford's CEO, Mark Fields, made similar remarks recently, saying he remains "bullish" on the Chinese market. 

The recent stock market plunge in China shouldn’t cause the automakers too much worry, says Brinley. 

“It’s widely expected that a lot of the buyers buying new vehicles right now in China aren’t necessarily the same people playing in the stock market. However, when you see this much turmoil in the economy, in general, you’ll see reduced consumer confidence, and you may see the sales slow-down accelerate,” says Brinley.

Ford’s July sales were off 6 percent compared with a year ago. (Chinese drivers go for the Ford Focus, by the way.) GM’s July sales in China were down 4 percent.          

“It’s a cyclical industry,” says Brinley. “But not every market is on the same cycle.”

William Holstein knows all about that. He wrote the book, “Why GM Matters: Inside the Race to Transform an American Icon,” and spent time in Shanghai researching the company’s operations there. He says it’s way too early to speculate if China’s cooling economy will hurt GM’s overall profitability or lead to layoffs in the US. Holstein underscores that GM is used to operating in dozens of countries where economic fortunes routinely shift.

“They know how to roll with the punches, so to speak. Europe has been a sore spot for years. Russia has recently been disrupted and they’ve had to pull some production out of there. Brazil has hit some air pockets, some tough times,” says Holstein.

And now, GM is hitting tougher times in China. But there are ways to adjust to the changing economic conditions.

“They can make fewer cars, without having to close down any lines or fire any workers. They can slow the rate of capital investment there (in China), they’re planning to spend billions of dollars there, but they can slow down. So they have many different tools they can use for riding this out,” says Holstein.

And it helps that US sales are strong right now: Detroit’s automakers sold more cars domestically in July than any July since before the recession. It could be the reverse of a few years ago — that’s when US sales were tanking and strong sales in China helped prop up Detroit.