GM Tries to Reverse Course, but Can it Catch Toyota?
Jun 4th, 2008 | By Jason Simpkins | Category: Stock Market InvestingA Race Around the World
Auto sales in China climbed 18% in the first four months of the year, Xinhua reported. And auto sales in China are expected to exceed 10 million units this year, which would represent full-year sales growth of 14%, according to the China Association of Automobile Manufacturers (CAAM).
GM has already been quick to boast of its success in the world’s fastest growing market, proudly announcing that it was the first automaker to sell 1 million vehicles in China in a single year.
“From day one, GM and our partners have been committed to continually rolling out new and upgraded models with specific engineering done in China for China to satisfy the needs of Chinese vehicle buyers across the country,” GM’s Wagoner said.
The partners Wagoner mentioned are a big reason why GM was the first to hit the 1-million-car milestone. GM’s flagship joint venture in China, Shanghai General Motors Co. Ltd., sold 500,308 vehicles in 2007, a 22% increase from a year ago, Shanghai Securities News reported.
According to Kevin Wale, president of GM’s China unit, the company won’t be tapping the brakes on its China-focused investments anytime soon. He recently told Bloomberg News that GM would spend about $1 billion a year on production and sales in China over the next five years. Wale estimates that China’s total automotive demand will rise to 9.5 million to 10 million vehicles in 2008.
“GM’s main hope is put in Asia-Pacific within which China is the most important part,” Ashvin Chotai, an analyst with Global Insight Inc., told Bloomberg. “Even with this $1 billion a year, it’ll be tough to remain No. 1 in China. With China becoming the most important strategic market in the world, it’s crucial to have their investment to stay in the race.”
Toyota isn’t about to take GM’s progress in China lying down either. Earlier this year the company announced plans to set up a new automobile plant in China’s Jilin province - its eighth production plant in the country. Operations are expected to start in 2010, and the plant’s production could be as high as 100,000 vehicles a year.
Toyota is also opening its first research-and-development center in China next year. Based near Shanghai, and is expected to build more R&D sites in Tianjin (China’s third largest urban area near Beijing) and Guangzhou (China’s third-largest metropolitan area about 75 miles north of Hong Kong).
Most recently, Toyota announced it would spend $214.6 million to boost production capacity at a facility in Tianjin by 50% to 150,000 vehicles a year.
Whichever company manages to pull ahead in China will likely cement itself as the world’s automotive leader for decades to come. The stakes are definitely high as GM, founded in 1908, has been the annual global industry sales leader for 77 years. But it looks as though it will soon be passing the torch on to Toyota, at least for a while.
Source: GM Tries to Reverse Course, but Can it Catch Toyota?
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