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GM Defies Downturn in Chinese Market

Sales up overall but some problems appear.

by on Jun.06, 2012

GM China President Kevin Wales.

Signs of a looming economic slowdown failed to stop General Motors and its joint ventures from chalking up record sales in China last month – though it remains to be seen if the U.S. maker can continue to defy the unexpected downturn that is tripping up much of the rest of the Chinese economy.

That could be a serious problem for GM which saw record sales of more than 2 million vehicles in China last year, a surge in demand that helped it regain its position as global automotive sales leader.  GM is, meanwhile, hoping to more than double that figure, targeting Chinese sales of 5 million by mid-decade.

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Whether the Chinese market will cooperate is uncertain. Auto sales actually slipped during the first quarter, though the general consensus has been for about 10% to 12% growth for the full year — but even that target, modest by recent Chinese standards, is now in question.

“The increase in auto sales in China has recently slowed dramatically, and we expect this trend to continue because of slowing economic growth, high gasoline prices, and the expiration of government incentives for car buyers,” warns Standard & Poor’s credit analyst Robert Schulz.

But GM has been bucking the trend, in part because of an expanding model line-up.  The maker has had particular success with its Wuling joint venture and the even newer Baojun brand, which is targeting first-time buyers in third and fourth-tier cities in central and western China.

Overall, GM sold 231,183 vehicles in China in May, a strong 21.3% from the same month in 2011 and a 1.7% gain from April of this year.

Shanghai GM, the U.S. maker’s first China joint venture – which produces Buick and Chevrolet products – saw its domestic sales rise 7.1%. SAIC-GM-Wuling, the microvan joint venture that been driving most of GM’s sales growth in China over the past 18 months, sold 127,749 vehicles in May, an increase of 35.9% year-on-year.

But there were some setbacks.  The smaller FAW-GM joint venture sold 3,756 vehicles in the domestic market last month, down 0.7% from last May.  And Buick sales totaled 51,360 units in May, down 1.2%. Cadillac sales were also off for the month, down 2.2%.

However, Chevrolet sales in China were up 13.1% setting a May record of 48,563 units. Sales of its most popular model, the Cruze, rose 34.0% to 18,977 units. That was followed by the New Sail, which delivered sales growth of 86.8% to 18,773 units.

Sales by Wuling, which is oriented toward sales in rural and the interior of China, jumped 34% year-on- year to a May record 119,721 units. Demand rose for its entire minivan lineup. The Baojun brand had sales of 5,013 units in its first May in the market.

For the first five months of 2012 as a whole, GM and its joint ventures sold a record 1,203,552 vehicles in China, an increase of 11.5% year-on-year. Shanghai GM’s sales in China rose 6.4% to 530,422 units, SAIC-GM-Wuling’s domestic sales grew 16.6% to 645,020 units and FAW-GM sold 25,815 vehicles in China, off by 3.5%.

Analysts will be watching the sales trends closely in June, a particularly important month for GM.

“Our Shanghai GM and Pan Asia Technical Automotive Center joint ventures are marking their 15th anniversaries in June,” said Kevin Wale, President and Managing Director of the GM China Group. “As we celebrate these important milestones, GM is looking forward to building on our success through continued growth in our largest market.”

Now, whether the Chinese market will cooperate remains to be seen.

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