GM plans $5 billion in China investment
SHANGHAI: General Motors, the largest automaker worldwide, plans to
invest as much as $5 billion in China over the next five years to expand
its share of the fastest-growing major car market in the world.
The company will spend about $1 billion a year on car and engine
development, production facilities, technical and after-sales support
and infrastructure, said Kevin Wale, the president of GM's China unit,
in Shanghai on Wednesday.
GM will sell more than one million Cadillacs, Buicks, and other models
in China in 2008, a more than 150-fold increase in sales over a decade.
Toyota and Volkswagen both plan to add production capacity in the
country to raise their own sales.
"Even with this $1 billion a year, it'll still be tough to remain No. 1
in China," said Ashvin Chotai, an analyst for Global Insight. "With
China becoming the most important strategic market in the world, it's
crucial to have their investment to stay in the race."
Annual economic growth in China has averaged 9.6 percent over the past
five years, making cars affordable to more people. Total demand in the
nation will rise to 9.5 million or 10 million vehicles next year, Wale
said. That compares with sales of between 8 million and 8.5 million
vehicles for 2007, according to the China Association of Automobile
Manufacturers. The passenger car market will grow 70 percent to 9.2
million vehicles by 2012, according to Chotai.
"No one has seen growth like this anywhere in the world," said Wale. "We
target to grow a little faster than the market."
Toyota, the biggest carmaker by market value in the world, expects to
sell more than 450,000 vehicles this year. The company, based in Toyota
City, Japan, began building a second plant in Guangzhou in June to make
Camry sedans and Yaris compacts. Volkswagen, which has lost market share
to GM, plans to sell about 900,000 vehicles and will expand production
GM relies on Asia and Latin America for profit in contrast to its home
market, where it is closing factories and cutting jobs. Globally, GM
plans to build about 9.3 million vehicles in 2007.
In the first nine months of this year, GM posted net income of $481
million in Asia-Pacific and $754 million in Latin America. In Europe,
the company had a loss of $2.6 billion and in North America, it posted a
loss of $34.7 billion, mostly because it wrote down the value of future
GM is cutting first-quarter North American production 11 percent after
its U.S. sales dropped by the same rate in November. Growth in China,
Brazil and Russia kept the company's sales higher than Toyota's in the
first nine months of the year. U.S. sales may fall to 30 percent of the
company's total within 10 years, its vice chairman, Bob Lutz, said in
"GM's main hope is put in Asia Pacific, within which China is the most
important part," said Chotai.
GM is investing $250 million to build a research laboratory, the
company's China office and Asia-Pacific headquarters in Shanghai.
"There's no doubt there will be new facilities," said Wale.
South Korean auto sales
Hyundai, Kia, and other South Korean automakers will likely raise
production 3.4 percent next year as new models help increase domestic
sales, an industry group said.
The carmakers in the nation may build 4.2 million vehicles in 2008, the
Korea Automobile Manufacturers Association said Thursday. Domestic sales
will likely rise 6.6 percent to 1.3 million. Exports from local plants
may climb 2.1 percent to 2.9 million.
South Korean auto sales may rise next year, helped by growth in the
fourth-largest economy in Asia and the introduction of Hyundai's first
luxury sedan. Kia and the local affiliates of General Motors and Renault
are also adding new models and increasing production to fill surging
local and overseas demand.
"Continued economic growth should help stimulate new car sales, while
replacement demand for aged cars should also grow," said Kevin Lee, an
analyst at Good Morning Shinhan Securities in Seoul. "The planned new
models are surely positive for sales and production increases," Lee said.
Hyundai, the largest automaker in the country, is set to release
Genesis, its first rear-wheel drive premium sedan, in January. Its
affiliate, Kia, plans to introduce five new or revamped models next
year, including a mid-size sport-utility vehicle called Mohave, due to
go on sale in January.
GM Daewoo Auto & Technology, which builds 13 percent of the autos sold
worldwide by GM, plans to release a new large sedan in the second half
of next year. Renault Samsung Motors added the QM5, Renault's first SUV,
earlier this month.
Ssangyong Motor, the South Korean unit of SAIC Motor, the biggest
carmaker in China, is set to introduce a luxury sedan in the first
quarter of next year.
Sales of imported vehicles in South Korea will probably rise 23 percent
to 65,000 in 2008, the group said. The Korea Automobile Importers &
Distributors Association said Monday that sales would likely grow at
least 20 percent to 60,000.
During the first 11 months of this year, South Korean automakers built
3.74 million commercial and passenger vehicles, 7.2 percent more than a
year earlier, the Korean automakers' group said Tuesday on its Web site.
Domestic sales grew 6 percent to 1.1 million in the period.
The South Korean economy is likely to expand 4.8 percent this year and
4.7 percent next year, according to the Bank of Korea.