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GM Sets Its sights on China After Rough Year at Home
General Motors launched a two-pronged attack on the Chinese car market by unveiling two new vehicles in a week, but the US auto giant remains pragmatic about the challenges that lie ahead.
The first Chevrolet Blazer truck engineered for the Chinese market rolled off production lines this week at General Motors joint venture plant in the chilly north-eastern city of Shenyang to much fanfare last Friday.
The Blazer, produced by the Jinbei GM Automotive Company, was the second new GM vehicle to be unveiled in Chinese mainland in a week as the US automobile giant made a bid to crack open China's automotive market after a tough year on its home turf.
Three days earlier in Shanghai the US firm also unveiled its locally-made compact car aimed at individual car buyers and based on the German-designed Opal Corsa.
Back in United States on that same day, GM announced that it will phase out its Oldsmobile vehicle division after pouring three billion dollars into releasing new models of the 103-year old vehicle over the last several years.
The firm also unveiled plans to cut North American first-quarter production by 14 percent in the face of bloated vehicle inventories and slowing sales.
GM's troubles in United States stem from younger buyers' preferences for Hondas, Toyotas and other imported cars.
Against this troubled background at home, GM is pushing into China's burgeoning auto market, but the ride will be by no means smooth.
The biggest barrier to surging sales is not simply average annual per capita income of only US$1,000 a head, but regional protectionism from one Chinese city to another.
Chinese auto buyers rarely get a chance to decide whether they would prefer a car made by an American joint-venture or a Japanese firm, but are limited to buying cars made in their home towns.
For instance, the streets of the east China metropolis of Shanghai are choked with Volkswagen Santana taxi cabs, which are made by a local joint-venture between VW and Shanghai Automotive Industry Corporation (SAIC).
Volkswagen Jettas, which are made a joint-venture between the German firm and First Automotive Works (FAW) in north-east China's Changchun, are rarely seen in the coastal city.
"The biggest problem in China is selling (cars) in different cities ... you can't sell a Jetta in Shanghai or a Santana in Changchun," said Ian Miller, president of Jinbei GM.
Miller said Chinese cities all have different standards to certify cars for sale including a battery of emission tests.
"It's basically a case of cities trying to protect jobs ... but for the good of all the Chinese auto market it has to change. You have to have a free-flowing market to have growth," he adds.
GM has so far invested US$2 billion in the Chinese market, including joint-ventures and wholly-owned subsidiaries, hoping it will consolidate in coming years thereby allowing foreign manufacturers a growing slice of the pie.
The firm already owns a 50 percent stake in a 1.5 billion joint venture in Shanghai. And, the launch of the Chevolet Blazer marks the inauguration of a US$230 million joint venture between General Motors and FAW-Jinbei Automotive Corporation in Shenyang in north-eastern Liaoning province.
GM Jinbei will produce four models of two popular General Motors vehicles, the Chevrolet Blazer and the Chevrolet S-10 crew cab pickup beginning in May 2001
Yang Bo, Jinbei GM vice president of marketing and distribution said the firm is optimistic it will be able to cash in on the growing market for trucks in China.
"The market in China for medium-size pickups and SUVs is expected to more than double over the next 10 years, especially for trucks that are both durable and versatile," he said.
But to begin with those Chevrolet trucks will be sold to state-owned firms in northeastern China, where the road network cannot rival the growing system of highways along the country's southern and eastern coasts.
"We think that 57 percent of our product will go to government departments such as the petroleum industry, the police, the forestry department," Miller explained.
The Blazer's four-wheel drive will be a huge advantage in northern China, especially in areas where the road network is poor, he added.
The model has done well in other developing markets such as Indonesia and Brazil but will face a unique set of obstacles in China because it is classified as a truck.
Trucks are forbidden to drive through most Chinese cities until after dark in order to minimize congestion on Chinese streets -- another difficult feature of the Chinese market for GM to grapple with.
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