GM plans $5 billion in China investment

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 by 2010.
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 tax benefits.
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 October.
"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.
Civis Romanus Sum

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Gm is building cars in China to sell in china. Yet everything we pick up in the stores comes from china. Kinda like a vote, everything you buy from china is a vote for business to move there.

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