General Motors

China revs up as engine of revival for US car giants Ford, GM

PUBLISHED : Saturday, 20 July, 2013, 12:00am
UPDATED : Saturday, 20 July, 2013, 5:15am

American carmakers had their heyday in Detroit, but the city's slide into bankruptcy only serves to reinforce that the hoped-for renaissance for the US car industry will be led from China.

Massive investments, new model releases and a focus on the premium segment are the three elements that characterise global carmakers' expansion plans, which have become increasingly bullish on forecasts of sustainable sales growth in the world's most populous nation.

For American giants such as General Motors and Ford, the China market is one of the major battlefields where they face head-on competition with rivals such as Volkswagen and Toyota.

China, already the world's largest vehicle market, is likely to unseat the United States as the world's biggest market for premium cars in three years, according to consultants at McKinsey.

GM, which expects to more than triple its sales of Cadillac cars in China by 2015, is investing US$11 billion on the mainland to build four new assembly plants.

Chief executive Dan Akerson said last month GM was focusing on developing the Cadillac luxury brand on the mainland, seeking a 10 per cent market share by 2020.

GM topped the mainland market based on sales by number of units, however it is still lagging behind German brands in the luxury car segment, which sell three out of every four premium cars bought in China.

In the first half of the year, GM sold 1.54 million vehicles in China, representing nearly one-third of its global total. GM's Wuling minivans account for nearly half its total sales in China.

"The American giant can put Detroit behind it now since China offers it a tremendous opportunity," Tripod Capital fund manager Cao Hua said.

"It's time for GM to shift focus from low-priced products to luxury models."

China became GM's largest market in 2010.

Strong sales of small cars and minivans are not enough for the Detroit-based giant, said analysts, because it has to catch up to the German luxury competitors.

China saw 1.25 million premium cars sold last year. It is poised to report sales of 2.25 million upmarket passenger cars in 2016, surpassing the US to become the largest luxury car market, according to McKinsey forecasts, and to grow at an annualised rate of 12 per cent until 2020.

About 80 per cent of rich mainland households are bent on upgrading to a premium car in self-indulgent displays of social status, McKinsey found.

Ford meanwhile is looking to double its capacity in China to 1.2 million units by 2015 with the plan to set up a US$760 million assembly plant in Hangzhou , Zhejiang province.

Total passenger vehicle sales are expected to reach 30 million units by 2020, among which 3 million premium cars would be delivered to affluent households.

"You have to build a brand in a market like China," said Akerson.