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SHANGHAI, China - Government worker Xue Weiqing is just the sort of customer General Motors is banking on to help power its turnaround.
At 33, Xue is already buying his second GM car, a shiny Chevy Lova sedan, after outgrowing his Buick Sail.

"I had the Sail for almost two years and it felt just a bit small, so I decided to go for something a bit roomier," said Xue as he waited for his shiny dark blue sedan at a Chevrolet dealership in western Shanghai.

General Motors Corp., beset by sluggish sales and crippling legacy costs, needs China - the world's third biggest car market behind Japan and the United States - to provide growth it won't find at home and in other Western markets as it engineers its comeback.

While it's closing plants and trimming production in North America, GM is pouring more money into China - with plans to spend $3 billion in 2004-2007. It already has five vehicle factories and one engine plant in China, an auto financing venture and is quickly expanding dealerships.

So far the investment seems to be paying off.

Last year, GM surpassed German rival Volkswagen AG to become the No. 1 automaker in China, GM's biggest national market after the United States.

GM and its local joint ventures' sales jumped 36.7 percent, a tick above industrywide growth, to 645,680 units in the first three quarters of this year, helped by strong demand for newly introduced models such as the Buick LaCrosse and the Chevrolet Lova.

That compares with flat second-quarter sales in North America for GM, which reported a net loss of $3.2 billion largely due to one-time costs associated with its restructuring.

In 2005, GM's sales in China rose 35.2 percent year-on-year to 665,390.

"In China, GM operates on a level playing field with Toyota," says Peter Morici, a business consultant and professor at the University of Maryland, referring to GM's heavy burdens of pensions and other benefits back in the U.S.

"It does well in China because it has the engineering and marketing know-how to compete without those liabilities," Morici said.

GM is looking increasingly to its Chevrolet brand to rev up sales volume in this increasingly competitive market, where incomes still average only about $150 a month - about twice that in Shanghai.

In early 2005, GM announced that it would make Chevy its main brand in China. It incorporated the Sail, a compact model that was then part of the Buick brand, into Chevy's economy to mid-size lineup.

"What we're trying to do is build the brand here," says Steve Betz, Chevrolet brand manager at Shanghai GM, GM's joint venture with state-owned Shanghai Automotive Industrial Corp. "We have to win here. That's the overall goal. We can't take our focus away from here," he says.

Chevy sold about 80,000 units in China in 2005, its first year. This year, third-quarter sales were up 51 percent year-on-year, with the company forecasting full-year sales of more than 100,000.

"That's nice growth in a very substantial market," says Betz.

GM has also been helped by strong demand for the minivans and compacts assembled by its second joint venture, called SAIC-GM-Wuling, which accounted for more than half GM's total sales in China last year.

When GM set up its first $750 million factory in Shanghai in 1998, it faced an uphill battle against Volkswagen and Japanese rivals at a time when competition was so fierce the government was setting price floors to prevent automakers from bankrupting each other with price wars.

GM's first product for China was a luxury sedan based on the Buick Regal, priced at about $40,000 and restyled for chauffeur-driven government bureaucrats.

In recent years, passenger car sales have taken off, as growing numbers of Chinese families buy their own first cars.

The Chevy familiar to U.S. drivers isn't the one being sold in China. For one thing, the lineup includes no pickups, but has models which are not sold elsewhere, such as the Lova.

The target car buyer is a young professional, 20-35 years old. Someone like Xue, who said he commutes to work by bike and uses the car mainly for weekend excursions.

"Our goal is to capture them and keep them for life, bring them through the GM family," says Betz. "First, a Chevrolet. But let's face it. As people get more spendable income, they might want to move up to a Cadillac, or a Buick."

Toyota Motor Corp., Honda Motor Co., Volkswagen AG and two major Chinese automakers - Geely Automotive Holdings and Chery Automotive Co. - are also fighting tooth-and-nail for market share by expanding the range of vehicles they offer.

Although GM topped China's overall sales in January-September, the company's longtime best-selling model, the compact Buick Excelle, was in third place with 127,500 units. The top-selling model was the Jetta, made by Changchun-based FAW-Volkswagen Co., with 130,800 in sales, followed by Beijing Hyundai Motor Co.'s Elantra, at 127,800 units. Geely and Chery, newcomers to the market, hold a combined market share equivalent to GM's.

A relative latecomer to China, Toyota had a paltry 3.5 percent of the market last year compared to GM's 11 percent. But the company has a dozen plants making parts and assembling vehicles, and aims to raise sales to 1 million units, or a projected 10 percent of the market, by 2010.

"In the Chinese market, GM enjoys tremendous popularity thanks to successful sales and marketing," said Zhang Xin, an industry analyst at Guotai Jun'an Securities' Beijing office. "Their only real competitor is Toyota. But Toyota is developing very quickly all over the world, so it's possible it may overtake GM as No. 1 here, too."

20 Posts
Maybe because Chines car buyers are first time car owners and don't know much about cars.

They are fond of the GM Astra but do they know that the 1.8L engine snaps its timing belt at 40,000km instead of 100,000km and that a Toyota Camry's belt can last 150,000km or that the Corolla's 1.8L that use a chain will last over 250,000km. A snapped belt means a ton of repairs... if it's worth repairing.

And GM isn't selling its cars cheap either. China is its most profitable market. Do the Chinese know something that the whole world doesn't?

Now is the time to send GM, Mitsubishi & Proton bankrupt because the world is overcrowded with car manufacturers!
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