American carmakers lost market share in China.

In China, local automakers are outpacing American and non-Chinese counterparts, posing an existential threat to their businesses.

Government investments and subsidies have propelled Chinese companies ahead of the competition in electric vehicle technology and software. Meanwhile, U.S. automaker sales have plummeted since their peak a few years ago.

"Michael Dunne of Dunne Insights, who has been studying markets in China and other Asian countries for nearly 30 years, stated that he does not want to sound overly dramatic. Instead, he wants to be realistic when he says that within the next five years, Kia is more likely than not to be out of China. He explained that they are no longer competitive with the Chinese."

In 2023, GM's sales in China, including those of its joint ventures, decreased from a peak of 4 million vehicles in 2017 to 2.1 million, marking the first time since 2009 that U.S. sales of 2.59 million were lower.

The decline in equity income from the country, which is GM's second-largest market, was 34% for the year, with a 54% year-over-year decline during the fourth quarter alone.

Several factors have contributed to the decline of U.S. automakers in China.

Chinese automakers gained valuable insights from foreign carmakers that were mandated to collaborate with them in the region. Eventually, these successful Chinese companies acquired foreign brands, such as British MG and Lotus, and Volvo of Sweden. Additionally, China-based brands, including BYD, experienced an increase in outside investment.

Over the past decade, the Chinese market has undergone a significant transformation. Today, the idea of a car being a mobile device or smartphone is a reality in the country. Notably, cellphone makers Xiaomi and Huawei have recently joined the market.

Despite the recent sales setbacks of American automakers, Bill Russo, a former Chrysler executive and head of Automobility in Shanghai, advises that they should not abandon China. He believes that the changes that have occurred in the past few years are permanent.

"Russo posed the question, "If you don't compete in China, what will you do when China shows up in your backyard?" He added, "How do you know how to compete with them if you haven't even tried?""

Watch the video to learn more.