Tue, Apr 22, 2014 - Page 15 News List

GM to invest US$12bn in China

STRATEGY:The four-year plan includes building five more plants in China next year to boost its manufacturing capacity and take on rivals such as Volkswagen and SAIC

Reuters, BEIJING

US car giant General Motors Corp (GM) plans to invest US$12 billion in China from this year to 2017 and build more plants next year as it competes with aggressive rivals in the world’s largest auto market.

GM expects its China sales to expand by 8 to 10 percent this year, in line with the overall growth of the Chinese market, where foreign firms, such as Volkswagen AG (VW), and domestic players like SAIC Motor Corp (上海汽車) vie for more market share.

“We are investing wisely and accelerating our vehicle development and manufacturing to keep pace with market demand. In total we are investing US$12 billion between 2014 and 2017,” GM China president Matt Tsien (錢惠康) said at the Auto China show in Beijing.

GM plans to build five more plants in China next year, as part of its efforts to ramp up manufacturing capacity there by 65 percent by 2020, executives said on Sunday.

Rival Volkswagen’s early entry into China focused on rapidly developing eastern provinces — now it plans to push into the west.

VW’s luxury division, Audi, will target smaller megacities in central and western provinces to raise the number of dealerships by about half to 500 in the next three years, chief executive Rupert Stadler said.

“That’s where new business is emerging, where things get rolling,” Stadler said at the Beijing show. “We don’t need more dealers in Beijing and Shanghai.”

China’s auto market is forecast to expand by 8 to10 percent this year, slightly slowing from last year when it sold 21.98 million vehicles, up 13.9 percent from a year earlier.

Vehicle density in China’s smaller cities offers lucrative growth prospects.

The average number of cars per 1,000 inhabitants in Yaan, a city of about 2 million in central Sichuan Province is 18, compared with 123 in first-tier coastal cities Shanghai and Guangzhou, according to VW’s Web site.

VW was one of the first global automakers to launch production in China during the 1980s and is evolving its operations in the country by pushing west.

“A large sales potential for passenger cars will develop there fairly quickly,” Jochem Heizmann, head of VW’s China operations, told reporters. “That’s one factor driving growth besides state-induced urbanization.”

VW, which last year opened factories in the western cities Chengdu and Urumqi, is counting on double-digit market growth to increase group deliveries to a record of more than 3.5 million this year, from 3.27 million last year, CEO Martin Winterkorn said.

China’s auto market rose 13.9 percent to 21.98 million vehicles last year, compared with a 7.6 percent gain in the US to 15.6 million.

Wolfsburg-based VW, having eclipsed GM last year as the top-selling foreign brand in China, aims to consolidate its lead with aggressive spending.

Its two joint venture partners, First Automotive Works (第一汽車) and Shanghai Volkswagen, are planning to spend 18.2 billion euros (US$25.2 billion) through 2018, the year VW has pledged to take the global car-sales crown, on models, technologies and plants.

GM’s five new Chinese plants will be in Wuhan, Chongqing, Jinqiao and Shenyang. Four of those will be vehicle assembly plants, while the fifth one will be an engine plant in Shenyang.

The Jinqiao plant will make its flagship Cadillac sedans. GM aims to sell 100,000 by next year in China, rising from roughly 50,000 last year, executives said.

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