General Motors and its Chinese partners expect to invest $11 billion in China between now at the end of 2016 as part of an ambitious expansion plan in what is now GM’s second-largest global market.
GM Chairman and Chief Executive Officer Dan Akerson told analysts during a meeting at the maker’s Milford Proving Grounds that the company is financially strong enough to maintain a steady investment cadence in the years to come. The planned investment includes spending more than $11 billion in China over the next three-and-a-half years.
GM isn’t the only maker upping its investment in China, now the world’s largest national automotive market. During a visit to China, Ford Motor Co. CEO Alan Mulally announced the maker will double the size of its Changan Ford Engine Plant near Chongqing. The $500 million investment will bring capacity to 400,000 powerplants annually.
“This kind of expansion is nearly unprecedented, and it really reflects the level of commitment we have to this region,” said Mulally.
Virtually every global maker, large or small, has made a commitment to the fast-growing Chinese market, but few got in as early or have invested as much as GM, now tied as second best-seller in the region.
CEO Akerson stressed all of the capital for the investments in China will be generated by the company’s operations in that country. None of the capital for the ambitious plans, which will include a major expansion of capacity, will come from its operations in the U.S. or Europe where GM is still struggling to rebuild its Opel and Vauxhall brands.
GM expects to break ground on a new assembly plant for Cadillac this week. Cadillac’s Chinese sales were up 74.3% on an annual basis to 3,843 units in May. It was the brand’s second-highest monthly sales ever. Initially, Cadillac will be building the big XTS sedan in China though it will follow with other models, including the ATS. Local production is critical, analysts stress, to avoid significant import duties that have so far limited Caddy’s growth in China.
Overall, GM said it sold a record 252,942 vehicles in China in May, an increase of 9.4% from the same month last year. Joint ventures Shanghai GM and SAIC-GM-Wuling as well as all of their individual brands all set all-time sales highs for the month.
Ford China sales also set a new record in May after climbing 45% year-over-year. But at just 70,540 in the passenger car column, the maker lags well behind market leaders including GM and Volkswagen AG. Ford was a latecomer to China and it is now forced to pay a premium to try to catch up – one reason why S&P downgraded the maker’s stock from “Buy” to “Hold” this past week.
The expansion of the Chongqing plant could support more rapid growth, however. The facility will initially produce two engines, a 1.5-liter naturally aspirated inline-four and Ford’s new 3-cylinder 1.0-liter EcoBoost.
Paul A. Eisenstein contributed to this report.