General Motors’ (GM, Financial) President Dan Ammann said that China has been the automaker’s biggest international market since 2010. Last year, the country accounted for around a third of the company’s global sales. Quite obviously, the Detroit automaker is looking to expand in the market. As such Shanghai GM, in collaboration with its joint partner SAIC Motor Corp, plans to invest $16 billion in China by 2020. Here’s a brief look at General Motors’ aggressive strategy to capitalize on the occasion the mainland offers.
GM looking for China expansion
The Detroit carmaker is stepping up its game in China with an aim to increase its market share to 10% in the next five years, says the Shanghai GM President Wang Yongqink. General Motors would be investing the amount in developing new vehicles and upgrading existing models. For the next five years, it aims to annually build around 10 new vehicles or update models and expand its product line to 40 during the period.
Though General Motors has witnessed many ups and downs in China, company CEO Mary Barra, has a huge belief that China can turn out to be the growth driver for the largest Detroit automaker. According to Wang Yongqink, the automaker is targeting to annually sell more than 1 million units of Buick and Cadillac by 2020. At the news conference Wang said that the company has also decided to pour in another 26.5 billion yaun to build environmentally-friendly vehicles which would include 10 energy models. He said that fuel efficiency shall improve by 25% to 30% in the process of developing vehicles. The main reason behind working on better fuel economy is that China has one of the worst air pollution ratings which is why the government is discouraging carbon emitting cars and promoting green vehicles. According to the report by Reuters, Mr. Younqink said:
"In terms of new energy, we are keen on power efficiency and emission control and are ardent to go electrical throughout our portfolio.”
It should be noted that Shanghai GM’s announcement regarding its investment plans in China came after the automaker entered into a car marketing and financial contract with Alibaba Group Holding (BABA, Financial). The collaboration involves offering car finance and after sale service to customers.
Other automakers are raising their stakes, too
The growth opportunity in China is attracting automakers from all over the globe. The second largest U.S. automaker, Ford (F, Financial), is exclusively introducing a refurbished Taurus in this Asian market as it looks to counterbalance its slow sales in the U.S. Besides, Ford is planning to invest $4.9 billion to build new plants and models this year. Toyota (TM, Financial), the world’s largest automaker, is also planning an investment of $441 million in China as it looks to augment its annual production in the budding market. Automakers are pouncing on the opportunity that China’s auto market presents. It’s not going to be smooth sailing for any of the automakers.
General Motors is preparing to compete aggressively to grab a greater share in the mainland. The American automaker already enjoys a wide moat owing to its early entry in China compared with cross town rival Ford. The huge $16 billion investment is a testimony of the automaker’s dedication to establish its operations in the largest auto market. If the General Motors is able to solidify its hold in China, it could lift the company’s fortune many folds.
