Downtown Detroit’s Art Deco skyscrapers, built when money flooded into the “Motor City” in the 1920s, testify to the early years of America’s long dominance in car manufacturing. Although the center of gravity of the industry has shifted to China, the imprint of the “Big Three” persists. This year General Motors (GM) established new headquarters in the city. Last year, Ford moved its main office to its home suburb of Dearborn. The US base of Stellantis, of which Chrysler Group is now part (and whose largest shareholder, Exor, is part owner of The Economist’s parent company), is in yet another suburb, Auburn Hills.
These commitments can be interpreted as circling the wagons as well as a sign of confidence. Tariffs and regulatory changes have favored gas-guzzlers over electric vehicles that are gaining popularity elsewhere in the world. Detroit dominates the manufacturing of the giant pickup trucks and monster SUVs loved by Americans, and they are highly profitable. But by relying on the power of gasoline behind protectionist barriers, US carmakers risk falling behind competitors – primarily China – in an industry that will one day be taken over by EVs.
Philippe Houchois of Bank Jefferies says the Big Three have a recent “history of layoffs.” In 1950 three-quarters of the world’s cars were made in America; Now there is barely an eighth. GM left Europe in 2017 and sold increasingly loss-making Opel to Groupe PSA, now part of Stellantis. Ford’s European market share fell when it stopped making popular small models and failed to excite motorists with its EVs. In China, hyper-competitive locals have vanquished both GM, whose market share has nearly halved in a decade, and Ford, which has lost two-thirds.
As recently as 2004 GM was the world’s largest carmaker, selling 8.4 million vehicles per year, but last year it was only fourth with 6.2 million. Ford has slipped from third to seventh place. At home too, the combined share of the Big Three has declined from 90% to about 40%. Stellantis, a mix of American and European brands formed by the merger of Fiat-Chrysler and PSA in 2021, sold just 1.3 million cars in the US last year, less than half from 2004.
The forces reshaping the industry – electrification and the rise of China – have come at a cost to the perceived safety of insulation. Joe Biden’s administration imposed 100% tariffs on Chinese cars in 2024, shutting down cars that have rapidly taken over about a tenth of the European market. Mr Biden’s rollback of emissions rules and subsidies for EVs by Donald Trump has eased US carmakers’ efforts to electrify. But the past boom in EVs has been costly. Ford took about $20 billion in writedowns last year and Stellantis took $26 billion in writedowns, mostly to scale back EV plans; GM takes an $8 billion hit.
Mr Trump’s trade policies have also caused damage. Previous free trade deals encouraged moving the production of cars and parts to Mexico and Canada. Now massive tariffs on non-American materials, aimed at bringing manufacturing home, have cost Detroit billions in losses. Renegotiation of the latest agreement starting in July could require even more American content of vehicles to qualify for tariff-free trade, potentially driving up costs further.
Despite the pain, Ford and GM’s share prices have risen over the past year (see chart): Investors prize the short-term opportunity to sell profitable gasoline vehicles over the long term in the US. Stellantis, whose shares have fallen about 30% since Antonio Filosa became boss last June, is making a similar bet. A plan unveiled on May 21 proposes that 60% of the €36bn ($42bn) it invests in its brands over the next four years will be allocated to North America, where returns will be greatest. Analysts have welcomed the plan in principle, but questions remain whether it can be implemented in practice.
It’s not at all difficult to focus on the world’s largest car market after China, even though it has shrunk from about 1 million vehicles to about 16 million a year since the pandemic — and growth will be the slowest at best. “Our international footprint is historically small,” says Paul Jacobson, GM’s chief financial officer, “so we’re focusing primarily on our strongest markets, North America and regions like South America and China.” There is little foreign competition for the top-grossing vehicles on the market and their electrification has so far been unsuccessful. Ford plans to discontinue the F-150 Lightning, an electric version of its best-selling pickup, in 2025. GM and Stellantis have canceled plans to make their large pickup in EV form.
Mark Wakefield of AlixPartners, a consultancy, says the “wall” to keep the Chinese out gives American carmakers runway and money to grow. Despite everything, both GM and Ford have good cash flow. However, while some factories once earmarked for EV production are being repurposed for petrol vehicles, Stephanie Brinley of S&P Global, an information provider, points out that EV investment is “changing in scale but is still happening”.
Ford has created a “skunkworks” in California full of software engineers and other technical experts. Andrew Frick, president of Ford’s gasoline and electric-car businesses, says a new EV platform that could rapidly power multiple models is ready to go “head-to-head” with the Chinese. The first product, a $30,000 small pickup, is expected to arrive by 2027. At GM’s massive global technical center in Warren, a half-hour drive from headquarters, work continues on developing its latest batteries with innovative lithium and manganese chemistries that will reduce costs without affecting performance. Mr Filosa stressed that Stellantis is “not giving up on EVs” in the US and that its large European business and collaboration with Chinese partners means it will be ready to compete. “Europe is a laboratory for EVs.”
Will that be enough, at least for the Big Three to stay ahead at home? The combination of tariffs, regulations that would ban cars with Chinese software and hardware and broad agreement on the threat of Chinese technology even in a politically divided country appear to be formidable obstacles to Chinese competitors. Mr. Filosa reflects the thinking of many in Detroit when he says he doesn’t expect Chinese carmakers to be in the U.S. “for at least a few years.”
But big U.S. carmakers are in a tough spot because the Chinese are so far ahead and it’s “only a matter of time” before they arrive, says Charlie Chesbro of Cox Automotive, another data firm. And the Chinese are patient. State-owned carmaker Chery says it will launch in the US at an “appropriate time”, perhaps in two or three years. They already have a grip. Geely, China’s second-largest car maker, owns Swedish company Volvo, which has a factory in South Carolina. It can avoid sanctions by making cars there, even under its Chinese Zeekar and Lynk & Co. brands. Many Chinese brands also have design and R&D centers in the US.
Mr Trump is also ready to allow Chinese companies. In January he surprised Detroit bosses when he announced in the city that it would be “great” if Chinese car companies would build factories in the US and provide jobs. Ford boss Jim Farley has said it would be “disastrous” to let the Chinese in, although he has also reportedly suggested they should be forced to enter joint ventures under US control.
They are already beyond the borders. GAC, another state-owned company, is about to begin assembling cars in Mexico, where Chinese imports have rapidly captured 15% of the market. BYD and Geely are said to be eyeing factories in the country. BYD is also considering a factory in Canada, which recently struck a deal allowing annual imports of 49,000 Chinese vehicles with minimal tariffs.
Foreign carmakers battling the Chinese in Europe and around the world have also been forced to step up their EV game. They would definitely like to sell in America also. One way or another, Chinese competition will come to America. To preserve Detroit’s former glory, the Big Three will have their work cut out for them.
