As much as is obvious about Chinese consumerism, there’s just as much that isn’t obvious. One of those quirks is that Chinese consumers love American cars, even more so than Japanese cars. In fact, GM sells more cars in China than it does anywhere else. It’s the biggest carmaker in China by market share (15%), and the country accounts for more than a third of General Motors’ profits. So, as China goes, so goes GM.
Ford is a relatively big deal in China as well, though its market share is only about 20% of that enjoyed by General Motors, or roughly 3% of the total Chinese market.
If China really is hitting an economic wall harder than the U.S. is, or as hard as Europe did, GM is going to feel it more than anyone else. So far, worries of China’s slowdown have been just that — worries — but where there’s smoke, there could be fire.
Great … but what’s that got to do with Toyota and Honda?
Both are relatively big names in the Chinese auto market too, and compete with General Motors on that front. But things are getting complicated.
A recently developed row over a small island in the East China Sea has soured Chinese consumers on Japanese carmakers … enough to make the Chinese stop buying Hondas and Toyotas. It matters, because China is now the biggest auto market in the world. If both major Japanese manufacturers are out of the way, GM could widen its lead there.
Though the spat didn’t impact third quarter’s results too much, it will impact Q4’s numbers — and all future results as well — until the argument is over. That could be years.
Advantage: General Motors — at least until further notice.
And the Winner Is …
That’s a lot to work through, and don’t think for a minute that just because Ford is healthier on two fronts, GM’s one strength — China — couldn’t more than offset those.
However, Ford seems to be dealing with fewer “ifs” on the international front, and at the very least you know you won’t have to contend with a strong selloff if and when the U.S. government sells its 33% stake in General Motors. Plus, Ford shares are priced lower than GM’s on a forward-looking basis.
As a whole, if you’ve only got room for one in your portfolio, Ford’s the name to own right now.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.