Geely, Haval, Jetour — even those interesting-looking iCaur electric SUVs that are one vowel away from a legal fight with Apple — these are the cars you’re seeing everywhere on South African roads. We are in apocalyptic times for European car manufacturers, evidenced by such shocking headlines as “BMW pulls out of Paris show as new CEO slashes expenses”.
Disruption is an incredible thing to witness. Chinese car manufacturers have taken the European names to the woodshed with a simple recipe: upmarket vehicles at affordable prices. Instead of trading on brand heritage, they are selling cars based on spec sheets. The state of the automotive market shows just how quickly provenance will be cast aside by consumers in favour of a lower car repayment and beautiful leather seats.
The Europeans have only themselves to blame. Regional policies have made Europe an unattractive place to design and manufacture vehicles. The Chinese would’ve been tough to beat even without these issues. But once you include them, it looks as though there’s little hope for a number of European brands.
BMW has been seen as a bastion of hope for Europe. The German provider of driving pleasure enjoys a particularly strong following in South Africa, and many other countries as well. The electric vehicle (EV) range also looks great, so BMW is positioning itself solidly for the future. And yet, here it is, pulling out of the Paris Motor Show.
Sometimes, a market is so severely broken it should be avoided altogether. Over 12 months, BMW’s share price has tanked 36%. Mercedes-Benz has lost 19%. Volkswagen is down 29%. Stellantis, despite having already been seen as a cheap value stock, has dropped 41%. Even Ferrari (yes, that Ferrari, and its supposedly bulletproof business model) is down 28%. There are simply no winners here.
But if you catch a plane across the Atlantic and check out the US names, the General Motors share price has risen 55% in the past year, while Ford is up 25%. In the market edition of Ford vs Ferrari, the Americans are coming out on top.
There are many factors at play (including a vast share buyback programme at GM at attractive valuations), but the really big driver is the competitive realities of the US domestic market.
Whether you make the argument from the standpoint of protectionism (tariffs) or patriotism (’Murica still loves a beefy V8), the reality is that the Chinese just haven’t created a stir in the US like they have elsewhere in the world.
In GM’s latest results, it reminded the market that it is still No 1 in total sales in the US and No 2 for EV sales. The cover slide for the earnings deck features a Chevrolet Corvette with a US flag-inspired design on the hood. It’s so proudly American that it looks capable of playing the national anthem out of the exhausts.
The North American market is where you want to be winning right now. GM’s adjusted ebit margin in North America was 8.6% in the latest quarter, significantly higher than 6.1% a year ago. Most importantly, these levels are in a different zip code entirely to those of GM International (excluding China), where margins fell from 4.1% to just 2.9%. GM shareholders are unbothered by the company’s modest market share in Europe, the Middle East and Africa.
China itself is also becoming a very difficult place to sell cars. If the Chinese brands are winning market share in global markets, you can imagine how competitive the domestic market is. GM has a joint venture in China that saw margins improve from 2% to 4.1% over the past year (not directly comparable to adjusted ebit margin elsewhere due to accounting differences). That’s an impressive direction of travel.
With market leadership in the US and other helpful growth engines such as subscription revenue, GM has felt confident enough to upgrade guidance for financial 2026 across key profitability and free cash flow metrics. The European mind cannot comprehend such an eventuality.
Sometimes, a market is best avoided altogether — because even when you win, you’re losing. That’s the reality facing the European names. Even if EU governments take a harder stance on Chinese cars and increase tariffs, those domestic markets are simply too small to support these capex-hungry manufacturers. If you’re going to be inside a walled garden, you want that garden to be the US.