General Motors Eyes China's Prosperous Auto Market

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Last updated at: (Beijing Time) Friday, February 28, 2003

General Motors Eyes China's Prosperous Auto Market

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General Motors' move into the Chinese market has increasingly pushed its business expansion, and at a very much faster speed than its rivals, says Phil Murtaugh, top official overseeing GM China operations.

"We have reaped great success not only in market performance but in cooperation with our strategic partners, not only in expanding our portfolio but in forming the distribution network," the 48-year-old chairman and CEO of General Motors China noted.

As the world's largest automaker and one of the largest foreign investors in China, GM has set up four vehicle-manufacturing joint ventures in the country, along with one design joint venture and two solely-funded enterprises. It employs nearly 9000 people.

Before China joined the World Trade Organization, many expected the country's car industry would be among sectors most affected bythe move. In 2002, the first year after China's entry into the WTO,however, GM registered a record high increase in sales of over 300percent, as Chinese quickly snapped up 260,000 vehicles of all types, including imported ones.

"Somebody predicted that the Chinese industry would suffer a lot, but it proved false while China's car sales reached an historic high. Meanwhile GM also grew rapidly beyond people's expectations," Murtaugh said.

In the past year, China's auto output and sales reported unprecedented figures of 3.25 million and 3.24 million units respectively, dwarfing growth rates in the decade before 2002. And the country's car output topped just over one million for the first time that year, a sharp 55 percent rise from the previous year before China became a WTO member.

The robust expansion of the Chinese auto market has offered tremendous opportunities for foreign automakers. Industry analysts consider China will be the most powerful engine pulling auto markets worldwide in the next decade.

Murtaugh joined the initiatives six years ago to build the largest Sino-US joint venture -- the Shanghai General Motors (SGM) with its major Chinese partner, the Shanghai Automotive Industry (Group) Corp. (SAIC). These days modern car workshops with world-class facilities stand in the eastern suburbs of Shanghai.

"SGM is the model for cooperation between GM and SAIC, and it reached our design capacity within only four years. That means we did it much faster than any other company has ever done," the gray-haired chief executive said.

SGM has become one of the three largest car manufacturers in the country.

"I think far more important than 2002 is the year we actively became part of the development of the whole industry (in China)," Murtaugh said, referring to examples of GM investing 30 million US dollars to take over a 34 percent stake of the minivan maker SAIC-Wuling Automotive Co., later renamed as the SAIC-GM-Wuling Automotive Stock Ltd., and when GM lobbied SAIC into purchasing a stake in GM Daewoo, the first time a Chinese automaker had invested outside China.

He also noted that for the first time SGM had exported vehicle engines on a large scale to developed countries.

The chairman, who has worked for six years in China and became an "Honorary Citizen" of Shanghai, has witnessed first hand the fast-track development of the Chinese car industry.

Standing in his office beside the landmark Century Avenue in Pudong, Shanghai's economic powerhouse where world conglomerates are based, he looked at car flows outside the window and said: "There's an old Chinese proverb that rising tides raise all the boats, so I think the entire industry has had a good performance (in the past year). If the market rises 10 percent as we expect, then China will hopefully become, ahead of Germany, the world's third largest auto market this year."

"This is going to be very, very challenging for everyone," he added.

"Fierce competition is ahead, but the good news is the industry gives us great opportunities," Murtaugh said. Many of GM's Chinese suppliers have reached a certain production scale, and "if the whole market will remain as good, our China operations' cost will be more competitive".

"Our investment has indeed yielded significant achievements in the last year, and laid a solid foundation for further development," he said with apparent satisfaction. Even better, he stressed, the Chinese government actively abided by its WTO membership commitments in the first year after joining the organization. This had helped create a more transparent, standard market complying with international practices, which was good for promoting foreign investors' development in China, including General Motors.

Confident of China's auto industry, the executive also declared GM was also sure of the sustained prosperity of the Chinese economy, growing at an annual average rate of over 7 percent despite a shaky global economy. "I sincerely believe GM will win even more room for development in China," Murtaugh concluded.

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