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April 20, 2005

SHANGHAI SHOW: Lavish preview precedes Friday public opening

General Motors reportedly has staged a lavish preview of its offerings for Shanghai's 2005 motor show, which opens to the public on Friday - strobe lights flashed, drummers pounded and the Shanghai Symphony Orchestra accompanied as the automaker rolled out its offerings at a cavernous Shanghai shopping mall.

General Motors reportedly has staged a lavish preview of its offerings for Shanghai’s 2005 motor show, which opens to the public on Friday – strobe lights flashed, drummers pounded and the Shanghai Symphony Orchestra accompanied as the automaker rolled out its offerings at a cavernous Shanghai shopping mall.

Yet, the Associated Press (AP) noted, the extravaganza was overshadowed just hours later on Tuesday by news of GM’s biggest quarterly loss since 1992 – US$1.1 billion (€847 million) from January to March – amid rising health costs and lagging US sales.

“The China market is vital to us,” Bob Lutz, GM vice chairman for global product development, told AP, adding: “The importance of this market extends beyond our bottom line and beyond China.”

“As a director of a global automotive company, I know full well, if we are not successful in China we ultimately will not be successful,” Mazda marketing director Stephen Odell told the news agency.

AP said Mazda on Wednesday announced plans to begin production in China of two additional versions of its 6 and also said it would begin China sales of the Tribute SUV and RX-8 sports car.

The Associated Press said GM’s chief offering for the show is a new version of the Chevrolet Aveo, a four-door compact developed in South Korea by GM Daewoo Auto & Technology that will be manufactured by the company’s Shanghai joint venture.

The report said China was GM’s second-largest global market last year, with sales rising 27%year-on-year to nearly 500,000 – its joint ventures with Shanghai Automotive Industry Corp., or SAIC, and Wuling Automotive have been a major source of profits in otherwise bleak times.

But sales reportedly have been slowing and profit margins shrinking amid rising costs and falling sticker prices – Chinese automakers sold 574,300 passenger vehicles in the first quarter of this year, down 7.69% from the same period a year ago, according to the China Association of Automobile Manufacturers.

A year ago, “Customers were snapping up cars faster than the industry could make them. Margins were fat. Growth forecast charts were steep, straight lines,” said Mark Schulz, executive vice president of Ford Motor Co, told the Associated Press, adding: “I think it’s fair to say we’re going to see a much different mood at this show.”

Many in the industry have told the news agency they expect China sales to pick up in the second half of the year, as consumers put off by higher petrol prices and tighter lending policies in the first quarter jump back into the market.

Fewer than 3% of all Chinese families own cars, and automakers are counting on rising incomes in this country of 1.3 billion to power strong growth for years to come, AP said.

GM reportedly forecasts 10 to 15% annual growth in China’s car market this year and 10% growth for a few years afterward.

“We see continuing strong growth in this market. No longer stratospheric growth, but a steady 8 to 10 percent a year annually,” Ford’s Schulz told the Associated Press, adding: “There are no other markets anywhere that offer 8 to 10% growth.”

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