GM sales buck trend for China slowdown

The Financial Times, January 10, 2012

Click here to read the story at FT.com

General Motors, the biggest foreign automaker in China, defied a slowdown in the Chinese car market to reach record sales last year of 2.55m vehicles.

GM said in a statement on Monday that sales rose 8.3 per cent last year, well below 2010’s 29 per cent but significantly above an expected 4 per cent rise in sales for the total Chinese market, which is the world’s largest. Ford also announced its 2011 China sales yesterday, saying they increased 7 per cent.

Total market figures for last year are expected to be released within days by the China Association of Auto Manufacturers (CAAM), which has previously forecast sales would grow by less than 5 per cent in 2011, compared to 46 per cent in 2009 and 32 per cent in 2010. Auto market analysts attribute the decline to Beijing’s tightening of credit policy last year, and the withdrawal of tax incentives introduced after Beijing’s 2008 economic stimulus package.

Withdrawal of the incentives hit domestic car companies disproportionately hard, because they are strongest in the segments of the market favoured by incentives: small cars. This has allowed foreign automakers – including GM – to increase their market share at the expense of locals.

“The natural preference of the Chinese consumer is to buy as much car as they can afford. If they can afford to buy a multinationally branded car, they will”, says Bill Russo, of Synergistics auto consultancy in Beijing, former head of Chrysler in China.

Foreign market share, which was 69 per cent in 2010, may have risen by two to three percentage points last year – though the vast majority of foreign-branded cars are made in China, by joint ventures between foreign and Chinese companies.

“As the Chinese market develops, Chinese consumers are becoming more mature – and that is challenging Chinese auto brands, while benefiting US and European brands,” says Mr Zhang Junyi, of Roland Berger consultants in Shanghai.

Mr Russo says he expects GM to maintain strong sales growth this year. “If you look at the future, you have to be very bullish about GM in China. Their Baojun product line (the joint venture brand launched recently with partner SAIC) will give them a significant boost in tapping into growth in lower tier markets,” he said.

GM has repeatedly welcomed the slowdown in China’s overheated market. As Dan Akerson, GM chief executive, said in Shanghai in November: “You can’t have totally unbridled growth in a country evolving as quickly as China.”

No comments:

Post a Comment