GM Small Car Sales in China Soar

SHANGHAI Reuters reported today that General Motors Corp, with the launch of its Buick Sail this year, said on Tuesday brisk sales had won it a 20 percent of the country's small car market.

The world's largest carmaker said it had sold about 19,000 of the family cars since its debut in June and now hoped to follow up on that success with the launch on Tuesday of a pricier recreational version aimed at young urban Chinese.

But analysts said competition for China's cheaper car market was likely to heat up next year, especially from market leader Volkswagen (quote from Yahoo! UK & Ireland: VOWG.F), which is expected to launch its compact Polo in China before the end of 2001.

And even though the peak year-end car buying season is under way, carmakers are feeling a crunch as buyers await an expected fall in car prices after China joins the World Trade Organization next month, they said.

GM and Chinese partner Shanghai Automotive Industry (Group) launched the Sail in June, modeled after the U.S. automaker's Opel Corsa and priced at 100,000-125,000 yuan ($12,080-15,100).

The U.S. auto giant said on Tuesday sales of the Sail, said to be the first family car in China with modern safety features like dual airbags and antilock brakes, had nearly reached the 19,000 mark at the end of October.

About 16,000 were sold ahead of the launch in June and GM has said it expects to sell 35,000 this year.

On Tuesday, Shanghai GM launched a station-wagon style version, the five-seat Sail S-RV, priced at 122,500-135,500 yuan.

``Shanghai GM expects the Sail S-RV, like its predecessor, to become a popular choice among consumers,'' the U.S. carmaker said in a statement.

``The Sail has quickly captured a 20 percent of China's small car market,'' it said.

YOUNG BUYERS, TOUGH MARKET

The new car is aimed at urbanites in their 20s and 30s and Shanghai GM planned to produce about 3,000 Sail S-RVs by the end of the year, GM China spokeswoman Daphne Zheng told Reuters.

Foreign auto makers and analysts see China as one of the fastest-growing markets in the world as increasingly wealthy Chinese take to the roads.

Automakers are racing to launch economy-size cars to attract Chinese who cannot afford the larger sedans aimed at companies and which now dominate the market.

Analysts said GM will face much tougher competition next year from the Polo and cheaper Honda models.

Ford Motor Co is also building a plant in southwestern China that aims to make economy-size cars by the end of 2002.

While the long-term outlook for Chinese retail car buyers was rosy, the industry faces short-term hurdles such as numerous auto taxes and fees and under-developed auto financing, analysts said.

GM said it and the Industrial and Commercial Bank of China would Sail S-RV buyers a five to 10 percent interest rate reduction and longer financing periods as a promotion.

``Many people can afford to buy cars. But you've got to add on another 30 percent to the cost of the car itself, after including the many taxes and fees, insurance and other hidden costs,'' said Sun Hung Kai Research analyst Chen Rong.

``That's going to curb growth of the consumer car market until the government makes good on its promise to boost consumption by lowering these costs,'' she said.

Analysts said China's entry into WTO would also restrain buying for the rest of the year, as consumers expect import tariffs to drop afterwards and help bring down car prices.

Sun Hung Kai forecasts passenger car sales in China at about 700,000 this year, up from 650,000 last year.

GM expects its overall China sales in 2001 to be double last year's 30,000. The U.S. car maker now has a five percent share of the China market and Volkswagen holds 50 percent.

By the end of October, GM had sold about 46,500 vehicles in China this year, including nearly 25,000 Buick sedans and wagons, more than 1,000 Chevrolet Blazer sport utility vehicles and about 1,500 imported GM cars, Zheng said.