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GM Eyes Larger Chunk of China Market

General Motors, the world’s top carmaker, aims to increase its share of China’s market, its third largest, to up to 15 percent by 2007, shrugging off a slowdown in the country and racing to catch rival Volkswagen AG.


GM also reaffirmed last week that it hoped for record Asian sales this year after it sold nearly 40 percent more vehicles in China in the first nine months, despite a market downturn.


Business had decelerated since the Chinese Government clamped down on lending and investment this year to slow an overheating economy, Troy Clarke, head of GM Corp.’s Asia Pacific division, said.


GM had a market share of about 9.3 percent in China now, Clarke said, versus Volkswagen’s own estimate of about 30 percent, although GM argues that if all vehicles are counted — from cars to trucks — the German firm’s share shrinks to 13 percent.


We hope we’re number two. It will be close, depending how the dice rolls: we may be number one, we may be number two,” Clarke said.


GM’s vehicle sales in China climbed 38 percent from a year earlier to 367,944 units in January-September, China-based executives said— off the pace of 2003, when sales jumped 46.4 percent, and the first half of 2004, when sales leapt nearly 60 percent to 259,653 units.


Now GM is among a coterie of foreign players from Ford to Toyota Motor Corp. spending more than US$13 billion to triple capacity to some six million sedans annually by 2010 — fuelling warnings from industry watchers of a looming car glut.


As part of efforts to close the gap with Volkswagen, the Detroit giant plans to double production in China to 1.3-1.4 million units from a current 700,000-750,000 units by 2007.


We believe it is necessary to satisfy, in that time frame, about 13-15 (percent) of the Chinese market,” Clarke said.


Despite slowing sales growth in China, Clarke said the company’s Asia Pacific operations should post record sales of slightly over 900,000 vehicles this calendar year and earnings were expected to top last year’s US$577 million.


We will best last year’s earnings,” he said, without elaborating.


The company said previously it expected its Asia-Pacific unit to rake in more than US$750 million in income this year.


The U.S. firm, which recently reported higher sales in North America, has its main carmaking venture in China with domestic champion Shanghai Automotive Co. It is battling falling market share and rising labor costs in Europe. China, too, is hardly problem-free.


Industry analysts expect car sales to rise just 10-20 percent this year, after doubling in 2003 to about two million sedans.


A recent price war has also hurt margins, with GM offering 11 percent discounts in May before Volkswagen countered by hacking prices by up to 11.7 percent in June.


Asked if the price war had bottomed out, GM’s China chief Phil Murtaugh said in Shanghai: “We certainly hope so.”


Clarke expected the Chinese market to recover eventually from the impact of credit curbs, but for now it was hard to predict when a turnaround would come.


If you look at the sales figures, it has affected the whole industry, maybe our sales even a little more than the industry’s,” Clarke said, noting 15-16 percent growth in passenger car sales in the first half had slowed to 12 percent in September.


(Shenzhen Daily October 25, 2004)

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