General Motors’ China operations are on track to break through the 2m sales mark in 2010, president and managing director Kevin Wale told a media gathering in Shanghai on Thursday.
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He said that would be around 25% up on 2009’s tally.
“Growth has been far more dynamic than anyone expected,” Wale said.
The overall new vehicle market, forecast at about 17 “point x ” million in 2010 was likely to grow to 19m in 2011, he added.
GM China’s unit tally was likely to exceed the US total in 2010 though the value of US sales would be higher due to market preferences for larger, more highly specified models and high value vehicles such as full size pickup trucks.
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By GlobalDataWale noted that GM had done an estimate of the Chinese market in 1998 and forecast it would be around 6m units in 2009.
“So we missed the market growth by over 100%, not because we missed any fundamentals in what was driving this change in market opportunity, we knew that a lot of people were going to move into the ‘acquisition stage’ of vehicle ownership, but the fact is the growth in China has been far more dynamic than anyone in the world ever experienced and it’s going to continue that way for quite some time to come.”
Wale, an affable Australian who served his initial auto industry time at Holden and ran Vauxhall in the UK before moving to Shanghai about five years ago, said China was now “firmly established” as the largest market in the world “and it’s not going to change”. It will, he insisted, continue to grow and would be “the dominant market by a long way” in the next five to 10 years.
GM has estimated that annual sales in China would grow by another 12.7m in the decade 2010-2020. “We expect China to be three times larger that the next biggest market growth and we expect it to be larger than the next 10 markets combined,” Wale said.
“So, not only do we expect China to be the largest market in the world, we expect it be be, by far, the fastest growing.
“To put it another way, the elephant in the room is China.”
He said the market had been driven by such factors as favourable government policies, such as tax breaks for lower capacity car models, and both central, and even more so, provincial governments regarding the car industry as essential to economic development, general economic improvement and the fact that people are moving into that acquisition phase, a term Wale uses frequently.
He’s referring to the point at which family income rises enough for a car purchase to be affordable and, in China, that is around the US$3,000-$4,000 mark(up to $6,000 is more likely in other markets). He noted that Chinese families often pool income which increases the buying power and brings them into car ownership earlier.
Individual income is also up and more affordable cars are on sale. And people aspire to car ownership in much the same way as in other more mature markets.
“We think these factors will continue – there’s no reason they would subside in the short term,” Wale said.
GM China categorises its markets by tiers. Tier one is major capitals such as Beijing and Shanghai, two is coastal cities, three is the west, “but not as far inland as you might think” and four is “close to central China”. Populous China has over 200 cities with over 1m people; the US has nine.
Talking to just-auto after his presentation, Wale said he needed to expand the number of Chevrolet dealers from 200 to 500 in just three years. That increase of 300 is about the size of the entire Opel network in Germany.
With multiple brands – Buick, Cadillac and Chevrolet, Opel (which appeals to buyers seeking imported German engineering, Wale said) plus local partner SAIC’s Wuling and others, including a truck brand with a 30% share, GM claims “total vehicle market involvement” and overtook Volkswagen in 2005.
GM now has a 13.5% share (with unit sales dominated by minivan maker Wuling’s products) ahead of VW’s 10%. The rest is split between Toyota, Hyundai and Ford with local makers such as Geely, Chery and BYD having about 3% each.
With that 2m – and counting – sales tally comes the infrastructure to support it – 10 assembly plants, what Wale describes as “a very good distribution network”, four powertrain facilities, engineering and R&D facilities employing 2,000, a finance JV, AC Delco operations, warehousing and parts and an OnStar telematics service that covers about 97% of the country.
Total headcount is about 35,000.
