Excelle is GM Entry Into China Price And Share Wars

SHANGHAI, April 19, 2003 Ben Blanchard writing for Reuters reported that General Motors Corp launched its third car model in China, the Buick Excelle, on Saturday to stake out a larger slice of a booming market it sees surpassing expectations again this year.

GM rolled out a silver version in a flashy ceremony amid a cacophony of rock music, glitter and a skit featuring a comely young couple who manage to trade in a decrepit Soviet-era car for their dream Excelle.

Despite concerns that fierce competition and a looming capacity glut might hit margins, GM China chief Philip Murtaugh said market growth might surprise again this year. Analysts predict car demand could grow anywhere between 15 to 30 percent.

Also on this year's slate: Cadillac luxury sedans, priced between 800,000 yuan ($96,650) and one million yuan -- going head-to-head with cars made by the likes of BMW AG.

"We're seeing phenomenal growth again," Murtaugh told reporters ahead of the launch. "Somehow it seems like this year's going to be a lot stronger than anybody anticipated."

Targeted at slightly more affluent customers than those for its Sail economy car, the Excelle will hit GM's 180 retail outlets in 1.6-litre or 1.8-litre models in July, possibly costing 130,000 yuan to 200,000 yuan.

The company intends to make about 20,000 of the cars a year, although it had not decided on final price and output targets, said Chen Hong, chairman of GM's $1.5 billion 50-50 venture with leading automaker Shanghai Automotive Industry Corp (SAIC).

GM had already notched a 54 percent year on year leap in sales in the first quarter to 84,073 vehicles, a galloping pace that matched overall market expansion, Murtaugh said.

MAIDEN FORAY

Last year's huge 56 percent growth in car sales took much of the industry by surprise. GM's China ventures sold 264,000 vehicles in 2002, a staggering rise of 325 percent.

The U.S. giant thus managed to claw some market share from rivals like Volkswagen AG, China's pre-eminent automaker with a commanding 40 percent share of nationwide sales.

"We have over eight percent market share now versus where we were at the end of last year with 7.7 percent," Murtaugh said.

Now GM is counting on the Excelle to spearhead a foray into what it calls the "low mid-end segment". It will soon shift production of the Sail from Shanghai to a plant in the northeast plant to make room for the Excelle.

The plant in Yantai "has 100,00 units capacity and our production target is to fill that up as soon as we can," Murtaugh said ahead of the Sunday opening of the Shanghai Auto Show.

GM bought a 25 percent stake in the 900 million yuan plant in Yantai, with SAIC and joint venture Shanghai GM splitting the rest.

Still, there could be a few bumps in the road ahead.

Analysts say China's car market -- where sales topped one million for the first time last year -- is headed for a price war as producers raise capacity and battle for bigger market shares.

Murtaugh conceded this could be a problem.

"It appears that pricing is moving as aggressively as it was last year," he said, citing cuts by Volkswagen and Honda (