General Motors’ investment in China has come under fire from President Donald Trump who declared in recent interview it was a bad investment.
GM now sells more cars in China than it does in the United States and during the past two decades the company has insisted the investment in China has not hurt its operations in the U.S. Instead, profits from its Chinese operations has helped it invest in new products in the United States and helped it meet pension obligations.
Only a small part of GM production of more than 3 million units is exported back to the U.S. and the Trump administration recently refused to roll back the tariffs on the Chinese-made Buicks GM sells in the U.S.
Trump, however, maintains General Motors made a “bad investment” when it decided to invest in China. GM has invested in China through a series of partnerships with Chinese companies, which also put up some of the funding for the new plans.
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In an interview with CNBC, Trump attacked GM for outsourcing and offshoring thousands of American manufacturing jobs to China and then exporting vehicles back into the U.S.
“If you look at what General Motors did, they moved so much into China. They can’t be happy about paying tariffs like we’re charging, 25% for cars. They built massive car factories, automobile plants, in China,” he said.
“So what happened is China has a tariff of 45%. We have a tariff of basically zero. It’s two-and-a-half percent. But basically, it’s zero. So they sell us a car, it comes right into our country, no problem. We sell them a car, we have to pay 45%. It doesn’t work that way and it’s not going to work that way anymore,” he noted.
However, the volume of complete vehicles exported from China and sold in the U.S. is far, far smaller than Trump suggests since almost all the cars GM and its partners build in China are sold to Chinese customers. Some are also exported to South America.
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Trump suggested that the corporation made a huge misstep by believing the playing field would not eventually be leveled through tariffs on Chinese imports, thus crippling their offshoring, made-in-China business model.
“Well, General Motors does not want to see us put a 25% tariff on China … when they built those plants there was no tariff,” Trump said. The trade war has put pressure on the Chinese economy, which also is shrinking GMs sale and profits.
SAIC Motor Corp. Ltd, GM’s principal partner in China, sold a total of 480,926 vehicles in May this year in China, down 16.3% year on year, according to a statement on the Shanghai Stock Exchange website Tuesday.
SAIC Motor Corp. Ltd delivered a total of 2,470,757 vehicles in the first five months this year in China, down 16.7% compared with the same period last year, according to a statement from SAIC.
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Sales of SAIC Volkswagen Automotive Co. and SAIC General Motors Co both declined. In the first five months, SAIC Volkswagen Automotive Co. sold 765,097 vehicles, down 9.3% year on year. SAIC General Motors Co. delivered 693,683 vehicles from January to May, down 15.2%.