General Motors launched two new vehicles in China last week but isn’t underestimating
the challenges ahead, Associated Free Press said in a special report from the
region.
GM rolled out the first Chevrolet Blazer SUV specially developed for China
a few days after the Shanghai launch of the Opel Corsa-based Buick Sail compact
sedan.
Go deeper with GlobalData
All this occurred in the same week that GM announced that it will phase out
its Oldsmobile vehicle division.
The firm also unveiled plans to cut North American first-quarter production
by 14 percent in the face of bloated vehicle inventories and slowing sales.
GM’s troubles in United States stem from younger buyers’ preferences for Hondas,
Toyotas and other import-nameplate cars.
Against this troubled background at home, GM is pushing into mainland China’s
burgeoning auto market, but the ride will be by no means smooth, AFP said.
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By GlobalData
The biggest barrier to surging sales is not simply average annual per capita
income of only $US1000 a head, but regional protectionism from one Chinese city
to another.
Chinese auto buyers rarely get a chance to decide whether they would prefer
a car made by an American joint-venture or a Japanese firm, but are limited
to buying cars made in their home towns, AFP said.
For instance, the streets of the east China metropolis of Shanghai are choked
with Volkswagen Santana taxis, which are made by a local joint-venture between
VW and Shanghai Automotive Industry Corporation (SAIC).
On the other hand, Volkswagen Jettas, which are a joint venture between the
German firm and First Automotive Works (FAW) in north-east China’s Changchun,
are rarely seen in the coastal city.
"The biggest problem in China is selling (cars) in different cities…
you can’t sell a Jetta in Shanghai or a Santana in Changchun," said Ian
Miller, president of Jinbei GM, which just launched the Blazer.
Miller told AFP that Chinese cities all have different standards to certify
cars for sale including a battery of emission tests.
"It’s basically a case of cities trying to protect jobs… but for the
good of all the Chinese auto market it has to change. You have to have a free-flowing
market to have growth," he adds.
GM has so far invested $US2 billion in the Chinese market, including joint
ventures and wholly-owned subsidiaries, hoping it will consolidate in coming
years thereby allowing foreign manufacturers a growing slice of the pie.
The firm already owns a 50 percent stake in a $US1.5 billion joint venture
in Shanghai. And, the launch of the Chevrolet Blazer marks the inauguration
of a $US 230 million joint venture between General Motors and FAW-Jinbei Automotive
Corporation in Shenyang in north-eastern Liaoning province.
GM Jinbei will produce four models of two popular General Motors vehicles,
the Chevrolet Blazer and the Chevrolet S-10 crew cab pickup beginning in May
2001 Yang Bo, Jinbei GM vice president of marketing and distribution told AFP
that the firm is optimistic it will be able to cash in on the growing market
for trucks in China.
"The market in China for medium-size pickups and SUVs is expected to more
than double over the next 10 years, especially for trucks that are both durable
and versatile," he said.
But to begin with those Chevrolet trucks will be sold to state-owned firms
in northeastern China, where the road network cannot rival the growing system
of highways along the country’s southern and eastern coasts.
"We think that 57 percent of our product will go to government departments
such as the petroleum industry, the police, the forestry department," Miller
explained.
The Blazer’s four-wheel drive will be a huge advantage in northern China, especially
in areas where the road network is poor, he added.
The model has done well in other developing markets such as Indonesia and Brazil
but will face a unique set of obstacles in China because it is classified as
a truck.
Trucks are forbidden to drive through most Chinese cities until after dark
in order to minimise congestion on Chinese streets — another difficult feature
of the Chinese market for GM to grapple with, AFP said.
