GM Daewoo plans to move production of its entry-level Matiz subcompact car to China by 2010, according to a report from South Korea.
The website Donga.Com – the online edition of the Dong-A Ilbo newspaper – said it had been told by the company’s marketing director that the producer of GM’s Chevrolet-branded cars sold mostly outside North America also wants to gradually move assembly lines for mid-sized cars to China and India as well.
The Matiz, badged Chevrolet Spark is already made at SAIC-GM-Wuling Automobile (SAIC-GM-Wuling) joint venture launched in 2002, according to GM’s website. GM China holds a 34% stake, while SAIC holds 50.1% and Wuling Automotive holds 15.9%. The joint venture is situated in Liuzhou, Guangxi Zhuang Autonomous Region and also manufactures a range of Wuling brand mini-trucks and minivans as well as the Spark.
Donga.com cited Lee Hyun-il as saying during a Lacetti wagon launch event: “Labour costs and land prices in Korea are very high. Production costs in Korea are over 20% higher than those in China, even when the transportation cost is accounted for. So we have already started working on moving our factories to China and India.”
According to the report, he added: “Given a three-year gap in assembling technology between Korea and China, it will be possible to manufacture cars in China and then import them back to Korea within three years.”
Lee also said that the move could be made right away, from an economic point of view, but a Korean bias against Chinese-made cars would have to be overcome.
A low profit margin of just 3% – and diminishing – on the little Matiz [also sold as the Spark in some markets] is another reason why he wants to shift output to China, Lee reportedly added.
In a comment that reflects the difficult domestic market conditions versus buoyant export demand, also noted recently by rival Korean automakers, Lee told donga.com: “Our market share in Korea is only about 7% and we have few reasons to stay in Korea. Under the circumstances, it is inevitable to move our production facilities for medium and large cars overseas.”
GM-Daewoo would keep research and development in Korea where it thinks its technology and worker pay are competitive even when compared with companies in the US and Europe.
The car maker told donga.com: “Even though we may move our production lines to foreign countries, we can still operate our R&D centre, which develops new models and important technologies, in Korea.”
However, the Dong-A Ilbo website said that the fact that Chinese car companies were already developing new cars with help from foreign automakers did not bode well for the future of GM-Daewoo R&D in Korea.
Bok Deuk-gyu of the Samsung Economic Research Institute told donga.com: “Japanese car maker Honda re-imports its cars from China and Thailand. If GM thinks going to China is better, then GM Daewoo can move to China anytime.”
Just-auto reported almost a year ago that GM-Daewoo’s future product plans include a fully redesigned Matiz due out late in 2008, and it is therefore likely that the shift to China production could coincide with the model changeover.
GM-Daewoo shifting Matiz production to China would parallel recent moves by Japanese and a rival Korean automaker to concentrate production of low-margin entry-level models in low-cost India. Hyundai Motor operations in Chennai are a global source of Hyundai‘s smallest model, sold worldwide with a variety of names while Suzuki builds its entry-level Alto there. Both car models were originally built for the domestic market only, with exports coming on stream later.
Several years ago, GM Daewoo sued domestic maker Chery, alleging its QQ model was a Spark/Matiz copy. Chery claimed it paid for the design.
A report last May said some entrepreneurs were considering importing the QQ into Europe.