Although it is still struggling with paying back debt in the West, the revived General Motors has started further expansion in the East, under a new cooperation model with its Chinese partner.
Earlier this month, General Motors Co and Shanghai Automotive Industry Corporation Group (SAIC) jointly announced that they had agreed to expand their long-time cooperation in the Asia region, outside China.
GM and SAIC, which currently operate eight joint ventures in China, have formed a new 50-50 investment company, General Motors SAIC Investment Ltd, in Hong Kong to facilitate their expansion efforts.
They also announced plans to leverage their resources to support expansion in emerging markets, beginning with India.
"Changes in the worldwide economy have created new opportunities in emerging markets," said Hu Maoyuan, chairman of SAIC. "By leveraging our individual assets and those of our China joint ventures, SAIC and GM are in a strong position to introduce competitive products outside China that will satisfy the needs of consumers in India and other high-potential global markets."
Based on the automotive industry's long-term potential for growth in India, SAIC and GM have formulated a joint strategy for investment in the country.
A worker inspects an SAIC-GM-Wuling Automobile Co minivan on the assembly line at the company's factory in Liuzhou. Since its establishment in 2002, SAIC-GM-Wuling's domestic sales have grown four fold. In December, 2009, it was the first Chinese automaker to sell 1 million vehicles in a single calendar year. [Agencies]
"Over the past decade, SAIC and GM have created one of the world's most successful automotive industry partnerships," said Nick Reilly, president of GM Europe, the former president of GM International Operations, which is based in Shanghai.
"Both companies felt this was the proper time to deepen cooperation beyond China's borders in order to enhance our partnership as part of our individual companies' long-term growth strategies."
Both companies also reached an agreement for GM to transfer 1 percent of its stake in Shanghai GM to SAIC Motor.
"This will assist China's leading listed automotive company in consolidating Shanghai GM revenue into SAIC Motor, which will provide investors with a clear understanding of its business. Shanghai GM management will continue to operate with the existing joint management structure and oversee operations of the joint venture," said Kevin Wale, president and managing director of GM China Group.
According to Wale, choosing India to start the Sino-US auto cooperation between GM and SAIC, is not only a perspective on the huge potential of the Indian market, but also a consideration that the current Indian market is quite similar to the Chinese market six or seven years ago.
"Based on the cooperation in Indian market, we both will look for more opportunities in other emerging markets in Asia, which now has a relatively low capacity of vehicles, but high demand for low-price small cars and minivans," said Wale.
GM and SAIC will utilize GM's two vehicle manufacturing facilities and a powertrain facility in India and GM's nationwide distribution network in the formation of a new joint venture.
Small cars from Shanghai GM and mini-commercial vehicles from SAIC-GM-Wuling, SAIC and GM's manufacturing joint ventures in China, will be produced and sold in India.
These products will join GM's global vehicles, allowing GM India to quickly add entries in growing market segments.
The establishment of the India joint venture is expected to be finalized in the first quarter of 2010. GM believes the additional models and potential volume growth will result in the creation of more jobs in India.
"It will be a win-win situation for both of us to expand in the Indian market, not only to increase GM's local market share, which is only 3.5 percent now, but also to boost Shanghai GM's business by exporting more products from China to India," said Wale.
SAIC and GM began cooperation in 1997, when the two automakers formed Shanghai GM and the Pan Asia Technical Automotive Center (PATAC) engineering and design joint venture.
That was followed by the launch of six additional China joint ventures, including SAIC-GM-Wuling, GMAC-SAIC Automotive Finance Co, China's first approved and operational automotive financing company, and Shanghai OnStar Telematics, which will provide a range of in-vehicle safety, security and communication services for selected Shanghai GM models starting this month.
Since it began regular production in 1999, Shanghai GM's domestic sales have grown by more than 22 times.
By the end of November 2009, Shanghai GM had sold nearly 3 million vehicles.
Since its establishment in 2002, SAIC-GM-Wuling's domestic sales have grown by more than four times. In Decemberm, 2009, it was the first Chinese automaker to sell 1 million vehicles in a single calendar year. The Wuling brand is also the first domestic vehicle nameplate to achieve annual sales of 1 million units.
SAIC-GM-Wuling sales are up nearly 60 percent on an annual basis in 2009. It is on track to remain China's mini-commercial vehicle sales champion for a fourth consecutive year.
In 2009, Wuling has also been the first Chinese brand to be exported and distributed from China to markets in South America, the Middle East and North Africa, under the Chevrolet brand through GM's distribution networks.
PATAC has played a key role in reengineering global products for both joint ventures in line with local preferences, regulations and driving condition.
"PATAC's capability in design and development of cars has grown substantially over the last few years. We have seen there are similar requirements in other parts of the world for products that PATAC is involved with, and also that SGM-Wuling is involved with," said Wale. "PATAC is continuing to take a stronger and stronger role in our world presence because it's naturally maturing and also because of the absolute size of the China market."
PATAC has been actively involved in a number of GM's global programs, such as the Buick New Regal, newly launched Buick LaCROSSE, and the new "Sail" which will hit the China market in 2010.