GM takes aim at growing China market
PHOTO SUPPLIED
The new Buick Invicta show car makes its world debut at a special event before the start of Auto China 2008 in Beijing April 19, 2008.
BEIJING–How do you say, "A car for every purse and purpose" in Chinese?
The boom in China's car market has given General Motors Corp a chance to revive the marketing mantra invoked by the company's long-time chief Alfred Sloan – and to avoid the costly missteps that marked GM's decline in its home market over the past two and a half decades, executives say.
"Certainly, the lessons of the past, we don't forget them when we come here," GM chief executive Rick Wagoner said at the Beijing Auto Show this week.
Sloan, who retired in the mid-1950s, is credited for driving GM toward a dominant position in the U.S. market with a brand strategy that started first-time buyers with affordable Chevrolets and dangled Cadillacs as a badge of success at the high-end.
GM's U.S. market share peaked at 45 per cent in 1980, before a long-running downturn spurred by quality problems, relentless competition from Japanese rivals such as Toyota Motor Corp and product miscues that made a Chevy almost indistinguishable from a Buick.
But now GM's rise in China under a decade-old joint venture with SAIC Motor Corp has given it a nearly 10-per cent share of a market it expects to become the world's largest by 2020. The China market also gives it a rare chance to try to repeat the business past with a happier ending for investors.
After a slow first quarter, GM is only targeting growth only in line with the Chinese market in 2008, which it expects to be up 16 per cent. That amounts to an admission that it could lose share since fast-growing Chinese car makers expect to outperform the industry-wide boom and GM's larger rival Volkswagen AG is on a roll.
HISTORY WITH A TWIST
But while some analysts expect Toyota to claim the industry's top spot in China by the middle of the next decade, GM executives believe they have a strategy to keep the Japanese car company from dominating in China as it already does in other Asian markets such as Japan, Australia and Thailand.
The core of that China strategy is readying up to four new models for its Chevrolet brand in the coming years, including a new low-cost car expected to capture sales from first-time car buyers, company representatives said.
The Aveo, which sells for under $10,000, represents the low end of Chevy's China line-up, but GM's head of Asian operations, Nick Reilly, said the automaker needed a car closer to $4,000.
GM introduced Chevy to China just three years ago after concluding its Buick brand was over-extended by a product line-up that had saddled it with everything from a minivan marketed as a kind of executive taxi to a cheaper hatchback.
"We could see Buick was being stretched," Reilly said.
Now GM has almost 200 Chevy dealerships concentrated in major Chinese markets including Beijing and Shanghai and plans for a significant expansion, targeting the dozens of other cities with a population of between 1 million and 10 million.
At Beijing's largest Chevy dealer, owner Lin Min Yu sold 779 cars in 2007, his first year in business. This year, he expects to sell 1,200 cars, with 70 per cent of his customers first-time buyers younger than 30 years old.
NO CASH ON THE HOOD
Yu, a 45-year-old former car importer, who led reporters on a tour of his glass-clad dealership featuring a pool table and Internet lounge for customers, said about 90 per cent of his buyers pay cash for their new cars.
GM also never offers sales incentives in China, a margin-eroding tactic it has struggled to break away from in the slumping U.S. market.
"If you put cash on the hood it will denigrate the brand," said Steve Betz, director of Chevy sales in China.
Meanwhile, GM used the Beijing Auto Show this week to show off a Buick concept car developed jointly by teams in China and the United States. The Buick Invicta is expected to replace the current-generation LaCrosse sedan as the brand's flagship.
GM designers in China insisted on features like a rich interior and a roomy back seat, qualities important in a market where wealthier owners are more likely to be driven than to drive.
"We have to pay attention to brand building so we don't just compete on price," Wagoner said. "We want to be cost-competitive, but we don't necessarily want to be the lowest price guy."
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