The first Baojun 630 passenger car from the SAIC-GM-Wuling (SGMW) joint venture came off the production line today in Liuzhou, Guangxi, China.
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Baojun is SGMW’s new brand of ‘affordable’ passenger vehicles that will be sold across China. This first model goes on sale in early 2011 through a new network of dedicated dealers.
The compact sedan was developed locally using proven GM technology. Its powertrain that meets all local emission standards as well as the Euro IV standard.
“We carefully studied the market and customers,” said GM China chief Kevin Wale. “Quality, design, fuel economy and durability were made a focus to appeal to local car buyers, particularly first time buyers in the nation’s second- and third-tier markets.”
According to SGMW general manager Shen Yang, “The Baojun brand will make SGMW a more competitive automaker as we roll out a full lineup of passenger vehicles under the nameplate in the coming years. We have high expectations for the brand and our first model which will compete in the middle range of the passenger car segment – the industry’s fastest growing.”
SGMW’s facility in Liuzhou has an initial annual capacity of over 100,000 vehicles. The facility has adopted GM’s Global Manufacturing System (GMS) and quality standards.
SGMW, a joint venture between GM China, Shanghai Automotive Industry Corporation Group (SAIC) and Wuling Motors, was launched in 2002. It is based in Liuzhou, Guangxi Zhuang Autonomous Region. SGMW currently manufactures a range of Wuling brand minitrucks and minivans as well as the Chevrolet Le Chi.
In 2009, SAIC-GM-Wuling had domestic sales of 1,061,213 units, becoming the only automaker in China to sell more than 1m vehicles in a single year. It has been the sales leader among Chinese minivehicle producers for four consecutive years. In the first 10 months of 2010, SGMW sold a record 1,058,346 vehicles.
The Baojun initiative builds on the success of the Chinese made Chevrolet new Sail, and represents a direct challenge to indigenous players such as BYD and Geely Automobile Holdings, which now dominate smaller cities and townships with affordable models.
“Those big coastal cities are rapidly becoming less than a quarter of our business, and the real growth is in what we call tier three, tier four cities,” Terry Johnsson, vice president of GM’s China operations, told Reuters. “It wouldn’t be unexpected to see 60% of the business in tier 3 and tier 4 cities (in five years).”
GM and its partner SAIC Motor had started to work on a new passenger car brand even before the launch of its new Sail, the cheapest foreign brand in China priced as low as CNY56,800 (US$8,600). It has been flying out of showrooms since its debut in January.
Nissan Motor and its Chinese partner Dongfeng Motor Group have also unveiled a new brand, Venucia, that is designed and developed specifically for the local market.
GM has yet to announce the price of the Baojun 630 but executives have said the pricing will be “very competitive”.
While efforts to tap the growing wealth of inland cities makes sense, industry analysts warn it may take consumers some time to accept new brands in a market swamped by dozens of foreign and local name players.
“They have not started selling the joint venture brands yet, and no one knows for sure how big the volume could be,” Marvin Zhu, senior market analyst at JD Power Asia Pacific, told Reuters.
“There is no doubt that they will win market share from local brands, but it takes time to win market acceptance initially.”
GM and its Chinese partners, which also include FAW Group, have sold over 2m vehicles so far this year, exceeding the annual sales target for the full year.
While continuing to reap profit from pricier Buick and Cadillac models in wealthy, coastal cities, GM has also been stepping up its presence in inland areas that have been a major growth driver for its Chevrolet brand.
GM has roughly 550 Chevrolet dealers in China currently. The number would possibly double over the next three to five years, with most of the growth coming from outside tier-one areas, said Johnsson.
Other foreign automakers are also making the push.
In Tangshan, a small satellite city of the northern municipality of Tianjin, many foreign brands, including Volkswagen, Ford and BMW, have opened dealerships. Even Daimler’s luxury Mercedes-Benz brand is seeking to establish a presence.
Next year, GM will add a second Chevrolet dealer in Tangshan, three times the size of the existing shop that first opened in 2005, according to Dai Xuemei, general manager of the existing Chevy dealer in the city.
“The new Sail is extremely popular here,” she said. “Newly-wed couples here like to have the Sail as their first family car, and parents also love to have it as a dowry for their daughter.”
