By Irene Shen (China Daily)
Updated: 2007-12-07 09:45

General Motors Corp, the world's largest automaker, plans to invest as much as $5 billion in China over the next five years to expand its share of the world's fastest-growing major car market.

The Detroit-based company will spend about $1 billion a year on car and engine development, production facilities, technical and after-sales support and infrastructure, Kevin Wale, president of GM's China unit, said in an interview in Shanghai.

GM will sell more than 1 million Cadillacs, Buicks, and other models in China in 2008, a more than 150-fold increase in sales over a decade. Toyota Motor Corp and Volkswagen AG both plan to add production capacity in the country to raise their own sales.

"Even with this $1 billion a year, it'll still be tough to remain No 1 in China," Ashvin Chotai, a London-based analyst for Global Insight Inc, said. "With China becoming the most important strategic market in the world, it's crucial to have their investment to stay in the race."

China's annual economic growth has averaged 9.6 percent over the past five years, making cars affordable to more people. The country's total demand will rise to 9.5 million and 10 million vehicles next year, Wale said. That compares with sales of between 8 million and 8.5 million vehicles for 2007, according to the China Association of Automobile Manufacturers. The passenger car market will grow 70 percent to 9.2 million vehicles by 2012, according to Chotai.

"No one has seen growth like this anywhere in the world," Wale said.

"We target to grow a little faster than the market."

Toyota, the world's biggest carmaker by market value, expects to sell more than 450,000 vehicles this year. The Toyota City, Japan-based company began building a second plant in Guangzhou in June to make Camry sedans and Yaris compacts. Volkswagen, which has lost market share to GM, plans to sell about 900,000 vehicles and will expand production by 2010.

GM relies on Asia and Latin America for profit in contrast to its home market, where it is closing factories and cutting jobs. Globally, GM plans to build about 9.3 million vehicles in 2007.

In the first nine months of this year, GM posted net income of $481 million in Asia-Pacific and $754 million in Latin America. In Europe, the company had a loss of $2.6 billion and in North America, it posted a loss of $34.7 billion, mostly because it wrote down the value of future tax benefits.

GM is cutting first-quarter North American production 11 percent after its US sales dropped by the same rate in November. Growth in China, Brazil and Russia kept the company's sales higher than Toyota's in the first nine months of the year. US sales may fall to 30 percent of the company's total within 10 years, Vice-Chairman Bob Lutz said in October.