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GM Looks Forward in China


 

 

After watching sales inChina increase 37 percent this year, GM expects more double-digit growth in 2007 as the Chinese market continues its rapid expansion.

GM sales in the People’s Republic of China, including those made by Shanghai GM, SAIC-GM-Wuling and a small but growing number of imported vehicles, are expected to reach around 950,000 units, according to Michael Bernhard, the chief financial officer for the GM China Group.

 

However, Bernhard and other GM China hands also noted that forecasts have been wide of the mark over the past several years and have underestimated the pace of growth in the Chinese car market.

 

“Our forecasts were woefully inadequate,” said Julian Blissett, deputy executive director of manufacturing at Shanghai GM.

All anyone knows at this point is that it will continue to grow and grow rapidly, GM executives said last week during a series of briefings on the eve of the Beijing Motor Show. “Next year’s expansion should leave GM just shy of selling more than one million vehicles in the Chinese market,” added Bernhard. However, selling one million units next year is probably too much of a stretch, he said.

Kevin Wale, the president and managing director of Shanghai GM, also said GM isn’t about to rest on its laurels and is adjusting its product portfolio and expanding its technical capabilities to meet the demands of the growing Chinese market, where sales could top eight million units next year.

 

“What we’re trying to do is grow faster than the market,” Wale added.

 

GM is introducing several new vehicles, such as the Cadillac SLS and Chinese version of the Buick LaCrosse, both of which were specifically tailored by GM engineers and designers for Chinese tastes. GM’s product portfolio in China now includes 32 different models, which range in price from the $4000 compact van made by Wuling, one of GM’s key Chinese partners, to the $120,000 Cadillac XLR imported from Bowling Green, Ky.

Nick Reilly, GM group executive for Asia Pacific, said one of GM’s strengths is its multi-brand strategy, which has positioned Cadillac at the top end to face off against other premium luxury brands such as BMW and Mercedes-Benz. Buick, which has made enormous inroads into China since it was first introduced in 1999, will sit in the broad middle range, while Chevrolet will cover the lower end of the market. Saab and Opel also have roles in GM’s brand strategy. Wuling, which is a respected brand in China, also gives GM excellent support at the low end of the market. The multi-brand strategy is the key to GM effort to hold off the charge by Asian brands such as Toyota, Honda, and Hyundai, which also have expanded rapidly.

GM’s operations in China are profitable, but GM’s financial problems back home in North America have meant that the company’s operations have had to self-finance capital spending, which is running at about $1 billion annually, Reilly said.

 

“We can’t look to North America or Europe . We have to self-finance,” he said.

 

GM also is learning some lessons about capital efficiency from its Korean subsidiary Daewoo, lessons also being employed in GM’s China operations, Reilly added.

Reilly also said that going forward GM also will have to concentrate in developing small vehicles. “If we’re going to compete in China, we’re going to have to compete at the low end,” he said.

Wale, however, stressed that was great opportunity in China. The demand for private vehicles in increasing rapidly and the Chinese are developing an emotional attachment to their vehicles, he noted.

Blisset added that China is forecasted to be the world’s top growth market over the next several years. Of the top 20 emerging markets, China is expected to grow at faster clip than the next 19 markets combined, he noted.

 

“People are making margins here. We’d kill for half our margins (in China ) anywhere else in the world,” he added.

 

Related Stories:

2006 Beijing Auto Show by Joseph Szczesny (11/20/2006)
GM plans China hybrids, Audi growing in China.

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