GM Could Soon Sell More Cars in China Than in the US

Yes that’s quite an eye catching headline isn’t it? The Las Vegas Sun reporting on the Beijing Car Show quoted GM as saying its China sales jumped 68% in March from a year earlier and 2010 sales could top 2 million vehicles. That would nearly equal last year’s sales of 2.1 million in the United States. Although admittedly GM has to split China revenues with local partners, the total China market sales are predicted to rise by 20% in 2010 to 16.5mn, on top of a 45% rise in sales in 2009 according to an FT article.

GM isn’t the only one getting excited about China. VW is reported to be increasing its investment budget for China by Euros 1.6bn ($2.1bn) bringing its total investment fund for the next three years to Euros 6bn ($8bn) as it builds new factories and develops new models for the market. VW sees China as a central plank in its drive to become the world’s largest car producer, overtaking Toyota by 2018, a plan that involves $28.2bn of investments worldwide over the next three years.

Chinese automakers also are promoting themselves more aggressively than ever, both in their home market and gradually for exports. According to the above reports, they plan to unveil a total of 75 new sedans, SUVs, experimental “green” cars and other vehicles at the show. Chery Automobile Co., China’s biggest domestic auto brand, plans to show 29 vehicles including four alternative fuel models. Chery already exports to some 70 developing countries in Asia, the Middle East and Latin America and is flying in 200 overseas sales agents to the show to encourage export sales. Chery’s sales target for this year are 700,000 vehicles, with exports doubling to 100,000 a company spokesman said.

Fears of a bubble are being expressed in some quarters, “There is a very real risk of overcapacity becoming an issue during the next few years, said Paul Newton, analyst at IHS Global Insight. But supporters point out China’s car ownership level of 48 vehicles per 1,000 people even in prosperous markets such as Beijing is far below the U.S. or European level of 400 to 500 per 1,000 people. Even developing Asian economies such as Malaysia or Thailand have 200 to 300 cars per 1,000 people suggesting China’s rapidly developing middle classes have a long way to go.

In a sign of the times, automakers are bringing out model embellishments specifically for Chinese buyers, such as more rear legroom in Mercedes E class and BMW 5 series saloons as most Chinese owners have a driver and use the cars as limousines, to more chrome or slanting headlights on a volume model to appeal to local tastes. Car makers are beginning to talk about the “C factor where developments for the Chinese market are leading innovations likely to be repeated elsewhere such as access to iPhone apps via the sat nav system. Many western car makers are premiering new models at the Beijing show before releasing them elsewhere in the world according to a Reuters report.

All in all it looks like the Chinese auto market is coming of age. Just so long as they don’t adjust the cup holders to carry Baijiu cups instead of a Coke can.

–Stuart Burns

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