GM boosts mainland stake prior to US IPO
General Motors will pay US$51 million to boost its stake in its mainland commercial vehicle joint venture ahead of next week's planned US$10.6 billion stock market listing in New York, eyeing a larger piece of the growing vehicle demand in second and third tier cities and towns across the mainland.
GM China agreed to raise its stake in three-way partnership SAIC-GM-Wuling (SGMW) to 44 per cent by acquiring an additional 10 per cent interest from Guangxi-based Wuling Group in exchange for US$51 million in cash and an agreement to provide technical services to the Wuling Group until 2013, GM said. Wuling will keep a 6 per cent stake in the venture and SAIC 50 per cent.
The deal gives GM exposure to a bigger slice of soaring demand for affordable, but reliable, minivans and passenger cars in the mainland's interior provinces, cities and towns. SGMW produces the Wuling Sunshine, a minivan-style light commercial vehicle priced from 30,000 yuan and ranked as the mainland's single best-selling automobile this year.
At the same time, SAIC-GM-Wuling is making a new foray into the mainland's lower-tier passenger car segment via its newly launched Baojun or 'treasured horse' brand. The first Baojun model was scheduled to roll off the production line later this month, said GM China president and managing director Kevin Wale.
'If you look at the lower end of each vehicle segment, it is massive,' Wale said yesterday. He estimated lower-tier mainland auto sales at about five to six million units per year.
'By itself this segment is larger than just about any other car market in the world. If you choose not to play in it, you effectively give it up to the Cherys, the Geelys and the BYDs,' he said, referring to several homegrown companies that have tended to capture the dragon's share of mainland demand for affordable passenger cars.
SAIC-GM-Wuling's sales of mini-commercial vehicles rose 5.1 per cent last month to 93,935 units, accounting for just under half of all sales reported by GM China's various mainland joint ventures.
GM's main passenger car business on the mainland, Shanghai GM, saw wholesale shipments rise 55 per cent in the first nine months of the year to 742,162 units under the Buick, Chevrolet and Cadillac brands.
Shanghai GM, 51 per cent controlled by SAIC and 49 per cent by GM, saw net income more than double in the period to US$1.92 billion, up 129 per cent from US$838 million in the first nine months of last year.
Revenue rose 60 per cent to US$13.88 billion in the first nine months, with sales by GM's joint ventures on the mainland now on track to surpass its US sales this year.
GM is hoping booming business in China will attract investors to next week's share sale, which will reduce the US government's controlling stake in the bailed out carmaker to well below 50 per cent.
GM China expected to sell around 2.3 million vehicles this year and maintain market share of around 13.5 per cent, Wale said. He expected total mainland vehicle sales would rise to a record of up to 17.5 million units, nearly 30 per cent up on last year.
