Takeout: GM May Export China-Built Autos to Japan, South Korea, Taiwan

DETROIT -- October 21,2002 Norihiko Shirouzu writng for the WSJ reported that General Motors Corp. , which has had trouble overcoming Japanese consumers' bias against American-built vehicles, is considering exporting made-in-China vehicles to Japan -- evidence that GM says the quality of vehicles built by its Chinese joint-venture partners has improved by leaps and bounds and is good enough to take on the likes of Toyotas and Hondas.

Phil Murtaugh, head of GM's manufacturing and sales unit in China, said the No. 1 auto maker already began a year ago exporting about 1,200 Buick GL8 minivans annually to the Philippines. He said GM also is considering exporting vehicles from China to Taiwan and South Korea.

In order to export to Taiwan, however, GM will have to wait until the Taiwanese government lifts a ban on bringing made-in-China vehicles into that country, he told a small group of reporters at a briefing near Detroit Friday.

However, Mr. Murtaugh said GM has no plans to bring Chinese-built vehicles into the U.S. or Europe, nor does it plan to significantly expand export of vehicles from China to the rest of Asia any time soon.

"I don't think China as a whole is going to be a major exporter because of domestic demand," the GM executive said. The Chinese government wants to see auto makers in China spur exports, but "opportunities in the domestic market are going to be more than adequate to keep us busy for a long time," he said.

Demand in the Chinese auto market, helped by falling vehicle prices and an improved network of highways and roads, has been surging. Mr. Murtaugh said GM expects consumers and others to buy about 3.4 million cars and commercial vehicles this year, up from 2.4 million vehicles last year.

This "explosive" growth in China, Mr. Murtaugh predicted, will likely put the country on pace to become the world's third largest market behind the U.S. and Japan by 2007 or 2008 and overtake Japan as the world's second biggest market by 2010. Mr. Murtaugh said China might move past the U.S. as the world's No. 1 market by 2025. GM controls about 8% of China's auto market through sales by its three joint venture auto makers, as well as through a limited number of imported vehicles.

Mr. Murtaugh said the primary motive driving GM to export its vehicles out of China is a need to impress Chinese consumers that the quality of GM's Chinese- built products is already world-class, in order to boost sales within China.

"People see you're selling in modern markets overseas in competition with Toyota, Nissan and Honda. If you're successful against them it gives (consumers) a lot more confidence in the quality of [GM's domestically produced vehicles in China]," he said.

Mr. Murtaugh said the Detroit auto maker began discussing the possibility about a year ago of marketing in Japan the U.S.-sized and left-hand-drive Buick GL8 minivan, which is built by GM's joint venture in Shanghai, to replace the Astro van.

The GM executive admits convincing fickle Japanese consumers of the vehicles' quality is going to be a challenge, and that sales of the GL8 would be limited. But "in my opinion, from the quality perspective, Shanghai GM is a very good source to import into Japan from." He cited a recent quality survey in China that put GM's Chinese-built products ahead of Toyota's imported products and others.

Besides growing demand for vehicles, GM has other competitive reasons to try to boost its manufacturing capacity and improve the quality of China-built vehicles: competition.

Rivals from Ford Motor Co. and Volkswagen AG to Toyota Motor Corp. and Honda Motor Co. are also piling in on the Chinese market. Honda has said, for example, it plans to build China's first export-only vehicle assembly plant in Ghangzhou. Starting in 2004, Honda plans to export about 50,000 vehicles a year to Asia and Europe.

GM "intends to remain the largest auto maker in the world," said Mr. Murtaugh. "In order to do that, we have got to be a big player in China," and "as China's market grows, we have got to continue to grow" and continue to "increase our capacity."