Slowdown creeps up on GM venture
(China Daily)
Updated: 2006-02-24 05:49

General Motors Corp, the biggest US carmaker, said sales growth at its Shanghai venture will slow this year as China's auto market cools and competition increases.

Shanghai General Motors Co's sales will increase about 20 per cent this year, down from a 29 per cent gain in 2005, Chris Gubbey, executive vice-president at Shanghai GM, said on Wednesday.

China's passenger car market may grow by 16 per cent this year after increasing by 23 per cent last year, he said.

Shanghai GM is GM's biggest venture in China and accounts for about half of GM's sales in the country, the world's third-largest vehicle market.

Chinese auto sales grew by more than 60 per cent about three years ago, Gubbey said. Since then, "there has been a lot more wait-and-see than expected, and now we're reaching a much more stable level of growth."

He said that over the next five years, the market will increase about 10 to 15 per cent annually.

GM has been tapping the rising demand in China by introducing more models and offering discounts.

In the United States, GM's home market, GM is losing sales to Japan's biggest automakers, such as Toyota Motor Corp and Honda Motor Co.

Toyota is threatening to pass GM as the world's biggest automaker.

General Motors' combined China sales rose 35 per cent to a record last year, helping the Detroit-based company boost market share to 11.2 per cent from 9.4 per cent in 2004. It took the top spot from Volkswagen AG in China.

Of every 1,000 drivers, only 20 own a car in China, compared with 700 in North America and 500 in Europe, Gubbey said.

"There's still huge potential growth in this market," he said.

GM on Wednesday introduced a new Buick model, the LaCrosse premium sedan, based on the car with the same name sold in the United States.

The LaCrosse was reengineered in Shanghai to meet China's road and fuel conditions, GM said in a statement.

"We will introduce more models this year," Gubbey said.

"Competition is intensifying. The number of players is expanding extremely quickly, as is the number of products."

Rival Ford Motor Co, the No 2 US automaker, said sales of Ford-branded vehicles in China rose 46 per cent last year to a record 82,225 units.

Volkswagen, Europe's largest carmaker, said its share of China's passenger car market fell to 17.3 per cent from the previous year's 25.2 per cent.

General Motors currently operates four vehicle assembly ventures in China, making Excelle, Regal, Royaum sedans, Excelle HRV hatchbacks, GL8 vans, and Sail compact cars.

It also sells Cadillac SRX sport-utility vehicles, Spark minicars and Wuling Sunshine minivans in China.

Profit margins were also reduced as General Motors and other carmakers in China last year cut prices by an average of 12 per cent to attract buyers.

"We're seeing improving economic sales in China and improving cost performance and are passing that onto consumers," Gubbey said.

"Car prices in China are more in line with international prices."

Facts and figures

In 2005, while Chinese automobile manufacturers witnessed another increase of sales volume compared with the previous year, they had to face falling profits from higher costs on raw materials and energy, as well as lower car prices, according to the latest statistics released by the Ministry of Commerce.

Last year, sales revenues from the 6,315 local auto manufacturers reached 1.19 trillion yuan (US$148 billion), an increase of 10.65 per cent year-on-year.

However, profits during the same period fell by 24.33 per cent, or 16.9 billion yuan (US$2.1 billion) less than that of 2004.