GM : `Lower-Medium' Segment For Growth In China

SHANGHAI April 19, 2003; Dow Jones reported that General Motors Corp. is counting on its "lower- medium" segment car, the Buick Excelle sedan, for further growth in China, where its sales have started to soar in the past year.

The introduction of the Excelle will be GM's first foray into the range of cars priced between 130,000 yuan ($1=CNY8.28) to about CNY180,000, one of the fastest growing segments of the China market, Phil Murtaugh, chairman and chief executive officer of GM China Group, told a small group of journalists Friday.

"There's a lot of cars competing in there...but it's growing very fast," said Murtaugh, who said that segment grew by 80% to 90% last year in China. Overall, sales of domestically made cars surged 50% on year in China to 1.1 million units in 2002.

Declining to make any sales predictions, Murtaugh said GM sold 84,000 vehicles in the first quarter of 2003, up 54% on year. GM sold a total of 264,000 units last year.

"We think that the Buick Excelle will be one of our volume leaders over time," said Murtaugh.

The new sedan will be introduced to China during the week-long Shanghai Auto Show, which opens to the media this weekend. The car will be produced at the company's Shanghai GM joint venture from the end of this month, said Murtaugh.

To make space for the production of the Excelle, assembly of the Buick Sail, GM's compact model, will be moved to the company's recently acquired factory in Yantai, he said.

To Market Cadillacs, Using Imports

GM is also stepping up its assault on another booming section of China's car industry, the minicar market. GM is introducing a new model called Spark into this segment, where cars are generally priced under CNY100,000. The five-door Spark will be a Chevrolet-branded car, produced by GM's SAIC-GM-Wuling Automobile Co joint venture, Murtaugh said.

The Spark is expected to available sometime in the second half of 2003.

On the luxury car front, Murtaugh said GM will start to market the Cadillac brand in China this year, initially using imports to meet demand. Local production in future would depend on sales volume, he said.

"The focus is to establish (Cadillac) as a luxury brand...Most Chinese people's understanding of it is still very old," he said.

Both at the luxury end of the market and among lower-priced models, price- competition in China's auto market is heating up, Murtaugh said.

"We've seen an awful lot of pretty aggressive (price cut) moves in the 10 to 15% range from many of our competitors," he said.

GM is aiming to counter competitors' moves by adding new content to its models while maintaining prices, he added. It is a strategy many foreign auto makers have been using in China.

"We added an awful lot of content to the Buick Regal and kept the price at the top of the line (at CNY369,000)," said Murtaugh.

Murtaugh was asked whether GM's business in China was at risk from the severe respiratory syndrome outbreak, or if GM had a contingency plan in case its suppliers' production was disrupted.

SARS hasn't affected GM's operations, Murtaugh said, and he didn't anticipate any impact in the future, adding: "Good idea though. We probably ought to think about it (contingency plan). But we haven't done that," he said.