RUNNING ON FUMES

GM'S CENTURY-OLD CHINA BUSINESS CAN'T KEEP UP WITH THE COUNTRY'S EV BOOM.

- NICHOLAS GORDON

MARY BARRA, CEO of General Motors, got a question at a recent panel that almost every auto CEO has grappled with in the past year: Why is your company doing so poorly in China? Less than a decade ago, China was an easy source of cash for GM, an "automatic" $2 billion-a-year dividend for investors, says David Whiston, an analyst with Morningstar. The U.S. auto giant sold millions of Buicks and Chevrolets in Chinaand, for more than a decade, sold more cars in China than in its home market of the U.S.

It's a different story now. GM's China business, primarily a joint venture with state-owned automaker SAIC Motor, is now losing the carmaker millions of dollars a quarter, as EV players like Elon Musk's Tesla and local competitors like BYD and Geely muscle out GM's tried-andtrue models.

"When you have more than 100 domestic Chinese OEMs [original equipment manufacturers] entering the market, most of which are losing money... it has become a race to the bottom with pricing and the level of subsidies," Barra said to editor-in-chief Alyson Shontell at the Fortune Most Powerful Women Summit in Laguna Niguel, Calif., in October.

To be sure, subsidies play a role.

But so does GM's failure to adapt to a rapidly changing Chinese market that's quickly embracing electric cars.

In a December security filing, GM put a number on how much its flailing China business will cost: $5 billion in write-downs and restructuring charges.

GM is not alone. All the legacy car giants missed the EV transformation in China and are now struggling to catch up. But GM's China struggles could signal something else for the once globe-trotting automaker: As the massive U.S.market hesitates to embrace electric cars, can American carmakers stay relevant in a global market that's going in the other direction? GM HAS BEEN in China for more than a century. In 1924, Pu Yi, China's last emperor, imported two Buicks into Beijing's Forbidden City.