News Column

GM Expects China Sales to Outpace All Markets by 2022

April 19, 2013
General Motors headquarters (file photo)
General Motors headquarters (file photo)

General Motors executives said they expect China auto sales to balloon to about 35 million vehicles by 2022, which would make the market bigger than the U.S. and Europe combined.

"Between 2012 and 2022, we believe China is going to outpace all the markets around the world," GM China President Bob Socia said in a group interview at the automaker's China headquarters.

Tim Lee, president of GM's International Operations unit, which includes China, acknowledged that Chinese economic growth has been "very lumpy."

The country's gross domestic product growth slipped to 7.7% in the first quarter, renewing concerns that China's double-digit growth days are over.

But Lee said economic growth is sweeping from the country's wealthy east coast to its poorer interior, opening up new opportunities for vehicle sales growth.

"No market is more critical than the China market for us," Lee said.

Yale Zhang, managing director of Automotive Foresight Shanghai, said industry sales of 30 million vehicles by 2022 is reachable.

GM and its joint ventures sold 2.8 million vehicles in China in 2012, up 11.3%, and the company's market share rose a full percentage point to 14.6%.

In the first quarter of 2013, GM's market share rose to 15.1%. Executives said they believe GM can continue to steal market share from its competitors as the market grows.

Still, the automaker faces a number of hurdles in China, including customers' preferences for German luxury brands and the government's subsidies for local carmakers.

Right now, GM is benefiting from new products and the struggles of the Japanese automakers, which posted a 21% decline in vehicle sales in the first quarter, according to Barclays.

Chinese consumers have been fleeing Japanese brands since tension flared between China and Japan last year over a territorial dispute.

"Lots of people think this is a temporary thing. We'll have to wait and see," Socia said.

Socia said GM would introduce 17 new or refreshed models this year in China, the company's largest vehicle market.

Lee said the company's International Operations unit would introduce about 50 new products in 2013, up from 18 in 2012.

Among the models GM recently introduced in China is the Buick Encore, a compact crossover that hit U.S. showrooms earlier this year and is sold in Europe as the Opel Mokka.

Lee, who also serves as GM's global manufacturing chief, said the Encore is "arguably the hottest car around."

"It's doing incredibly well," he said. "I keep asking myself, why can't we build more of these?"

The company also recently started selling the Cadillac XTS in China after launching production at a plant in Shanghai. The automaker has outlined an ambitious plan to triple Cadillac sales to 100,000 units by 2015.

"We will be launching a new Cadillac every year from now to 2016," Socia said. "We've got our sights set very strongly on the luxury market and we feel that Cadillac is going to help us out in that regard."

Socia said the company plans to localize many of the new Cadillac vehicles for the Chinese market.

Hans-Werner Kaas, director of McKinsey & Co.'s auto practice, said premium vehicle sales will grow at an annual rate of about 12% through 2020, compared to a projected growth rate of 8% for overall sales.

Cadillac faces huge challenges in reaching Chinese luxury buyers, who prefer Germany luxury brands Audi, BMW and Mercedes-Benz.

But Kaas said Chinese customers are brand conscious but not necessarily loyal to specific brands.

"Given that customer loyalty in automotive is not yet well developed or established, I do think there are opportunities for late arrivals or new arrives in the premium segment to capture share," he said.

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(c)2013 the Detroit Free Press

Distributed by MCT Information Services




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Source: Copyright Detroit Free Press (MI) 2013


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