China forges forward while Detroit 'retreats,' expert says

DETROIT -- Five years into its plan to reinvent itself as the dominant global technology leader, China has raced far ahead of others on electric-vehicle sales, forged into automated-vehicle development and led the way on deployment of next-generation cellular infrastructure.

"The Chinese are clearly on the offensive," said Michael Dunne, CEO of ZoZo Go, a consulting firm that advises American companies looking to do business in China. On the other hand, "If you look at the Detroit automakers, over the past five years, it's more or less been a theme of retreat," he said.

As President Donald Trump threw another curveball into the ongoing U.S.-China trade negotiations Sunday with a new wave of tariff threats, U.S. automakers are grappling with another vexing challenge: Their sales are tumbling in China.

General Motors sales peaked at 4 million vehicles in 2017, dipped to 3.6 million last year and are down 17 percent so far this year, according to ZoZo Go figures. Ford has had a similar decline, peaking with sales of 1.3 million in 2016, while falling to 750,000 last year. Sales from Fiat Chrysler Automobiles' Jeep climbed to 215,000 in 2017, but slid to 163,000 last year and have dwindled further this year, according to ZoZo Go.

As Chinese companies have developed their competence, paying for mass-market vehicles made by foreign companies has become less appealing, Dunne said Monday, speaking at an Automotive Press Association event in Detroit.

As the Detroit 3 have struggled to find an answer for declining sales, China has launched what Dunne calls Autos 2.0, a freshening of its automotive strategy that has focused extensively on autonomous, electric, shared and connected-vehicle developments.

For now, China's lead might be strongest in the EV segment. Among the country's 28 million vehicles sold in 2018, 1.2 million were EVs. Just last week, Contemporary Amperex Technology Co., a battery producer in China, told its investors it had started mass production of high-nickel batteries that could allow vehicles to go farther on a single charge.

Even as the Chinese have led on EV volume, they've lagged on battery tech development. But the CATL announcement was a sign they're quickly catching up.

"When it comes to battery technology, they're two to three years behind, but they're closing the gap quickly, and even Mercedes-Benz and Volkswagen will source batteries from CATL," Dunne said. " … As technology grows, more will migrate to China. That's the reality for any business, and the United States has taken it for granted that we're the biggest in the world. Now China sets the standards, and what if Germany and Korea and Japan follow that?"

Dunne says American companies looking to compete with the Chinese must innovate in ways the Chinese aren't yet capable of by themselves.

With China rallying to lead Autos 2.0, Dunne says the Detroit 3 are becoming more "vulnerable," as Chinese companies may no longer need to rely on their American counterparts for future technologies.

"If China's able to secure the technology it needs ... without partnerships, then what's the point of having foreign automakers in your backyard?" Dunne said.

The tech push comes amid China agreeing to end a law that limited foreign carmakers from owning more than 50 percent of any local venture. The law, which started in 1994, was implemented to help Chinese carmakers compete against more advanced international rivals.

The vulnerability for GM, Ford and FCA, according to Dunne, includes weakening mainstream brands as well as the political environment.

But, he said, "relying on buying and selling of cars is not going to get it done."

Michael Wayland contributed to this report.