CHINA: GM confident on China prospects, relaxed on overcapacity fears
GM expects double-digit growth to continue in China for the next several years and is more worried about underestimating future growth than recent concern over possible overcapacity in the industry.
GM's chief financial officer and vice chairman John Devine, in remarks reported by AFX, said that if anything, GM has underestimated the surprising growth in auto sales in China in the past few years.
"We have under called the growth here and that's something we want to be careful of going forward," he told AFX.
AFX said that China's passenger car sales have effectively doubled for the past two years, to 2.04 million units last year. But as the sales grew it was accompanied by an increase in both the capacity expansion plans of existing players and the number of entrants into the market, the report added.
Increasing competition threatens margins in the industry as companies cut prices to protect and win market share.
"Over the past several years, price cuts have become a normal part of the market - that's not new and I expect that to continue for some time," Devine said.
But 2003 was a good year for GM in China. Phil Murtaugh, chairman and CEO of GM China Group, told AFX that inventory levels at Shanghai GM were at six days level at the end of last year, and 25 days at its Wuling plant, compared to a normal industry level of 60-80 days.
To meet its supply shortfall, the company announced a major expansion plan in November last year which will see production capacity raised by at least fifty percent to 766,000 units a year by the end of 2006, the report added.
It is also reported that GM is planning to announce shortly a solution to the problems faced by its loss-making SUV making operation in China. Despite GM's overall success in the China market, its 50%-owned joint venture, Jinbei General Motors Automotive Co., sold just 3,289 SUVs in 2003 despite a production capacity of more than 30,000 vehicles a year.