GM's China unit to focus on domestic growth

BIRMINGHAM, Mich., Oct 18, 2002; Michael Ellis writing for Reuters reported that - General Motors Corp.expects to export more vehicles from its joint venture plants in China, but China will not serve as a major base for the sale of new cars and trucks to the rest of the world, GM's head of its Chinese operations said on Friday.

GM currently exports about 100 a month of its Shanghai-made Buick GL8 minivans to the Philippines where it is sold under the Chevrolet name. GM is considering exporting its left-hand drive GL8 minivan to Japan to sell in low volumes and is also in discussions with Taiwan to open its market to Chinese-made vehicles.

But GM's highly-profitable GM China unit has no plans to export vehicles to Europe or North America, Phil Murtaugh, chief executive officer of GM China, told reporters at a briefing outside Detroit.

"I don't think China as a whole is going to be a major exporter because of domestic demand," he said. "The opportunities in the domestic market are going to be more than adequate to keep us busy for a long time."

Honda Motor Co. Ltd. announced in July a joint venture to build the first export-only car assembly plant in China. Beginning in 2004, Honda plans to initially export about 50,000 cars a year to Asia and Europe from a new plant in Ghangzhou.

Murtaugh said that exporting vehicles in low volumes will help sales within China, by proving to Chinese consumers that domestic-made vehicles can compete with the best in the world.

"My export strategy at this point is driven by domestic issues," he said.

In the meantime, the Chinese market is growing fast enough to keep sales humming. Sales of passenger cars and commercial vehicles is expected to grow to 3.4 million units this year, far about GM's original forecast of about 2.4 million. About 1.2 million to 1.3 million of those 3.4 million vehicles are passenger cars.

"We just saw explosive growth," from March this year, Murtaugh said. "The growth has been huge and sustainable."

China will become the world's second largest vehicle market, surpassing Japan, by 2010, and could pass the United States by 2025, he said. Vehicle sales are expected to top 17 million in the United States this year.

GM China expects its sales to nearly double this year to about 115,000 units, up from 58,000 in 2001, due to strong sales of the Buick Sail and the Buick S-RV small cars.

GM does not disclose its profits from GM China. But the Detroit automaker earned $122 million through the first nine months of this year from its Asia-Pacific automotive operations, which also includes its highly profitable Holden division in Australia.

GM China's sales will grow further next year with the addition of a 34 percent stake in SAIC-Wuling, Chinese eighth largest car maker, which sells minivans, the largest and fastest growing segment of the market in China. The minivans, which seat seven or eight passengers, cost only about $3,000. SAIC-Wuling, based in the southern province of Guangxi, last year sold more than 120,000 minivans.

GM also plans to enter for the first time the "low-medium" family sedan segment of the market within a year to compete against the aging Santana from Volkswagen AG (XETRA:VOWG.DE - News), the new VW Jetta and the Citroen Elysee and the Peugeot 307 from French automaker PSA Peugeot Citroen.

The "low-medium" segment is the largest segment of the passenger car market in China but has had only moderate growth, Murtaugh said. He declined to say where GM would build the car, but said that both its Shanghai and Wuling joint ventures have the capability of making that type of vehicle.