GM to build $387m engine plant in China
General Motors Corp., the world's top auto maker, will build a $387 million
engine plant in China and buy a small vehicle producer there, as the U.S. firm
seeks more sales in a market suffering slowing growth.
GM, which replaced its China chief in March, has unveiled moves this year to catch Volkswagen A.G., the reigning market leader in the country. Both count China among their three biggest markets, but GM with its roughly 10 percent market share still trails Volkswagen's 13 to 25 percent.
Last week, GM opened a plant in its Shanghai base that brought nationwide capacity to almost half a million units.
"Mini-vehicles account for 25 percent of all vehicles sold in China and remain one of the fastest-growing market segments," Kevin Wale, GM's new China president, said in a statement.
"In 2005, sales are expected to exceed 1 million units."
China has been a rare bright spot for embattled GM, but growth in the world's third-largest vehicle market began slowing in the middle of last year when Beijing stepped up curbs on easy car loans and implemented other measures to cool the economy.
Before that, sales had averaged double-digit growth as a growing middle class got behind the wheel.
Global auto makers including Ford Motor Co., Nissan Motor Co. Ltd. and Toyota Motor Corp. are investing $15 billion to triple annual production in China to 7 million cars by 2008, triggering fears of a glut.
To make things worse, a growing number of car makers are offering discounts to carve out market share. In March, GM slashed the prices of two Buick models in China by up to 15 percent to counter a move by Honda Motor.
Yet the U.S. firm is sticking with a plan to invest more than $3 billion with Chinese partners to double capacity in the country to 1.3 million units by 2007, betting that the market will recover in the second half of 2005.
The engine plant in Liuzhou is expected to be completed by 2007 and will have initial annual capacity of 300,000 units.
Volkswagen posted a 6 percent drop in sales at its two Chinese ventures in 2004. GM posted a 27 percent rise in Chinese vehicle sales in 2004, though that was little more than half the pace it set in 2003.