Over the last three years, American car giant General Motors has consistently increased sales in the world’s largest automobile market. GM’s sales in China are now greater than in the US. By the end of 2014, the automaker held a market share of 14.8%. It now has plans to invest $14 billion in the country through to 2018, so it can increase sales by 40%.
THE ECONOMIC DOWNTURN
GM operates in China through 11 joint ventures and 2 wholly-owned enterprises. Together, GM and its Chinese partners sell their vehicles under brands such as Baojun, Buick, Cadillac, Chevrolet, Jiefang, and Wuling. This year began well – up until May, after which there has been negative growth.
To rejuvenate sales, GM has introduced measures to improve fuel efficiency, reduce emissions, embed digital technology into its cars, and revamp its kitty of popular models. Of course, the fall in sales is because the Chinese economy has slowed down to 7% growth down from the double digits of the previous years. But the Chinese market is still growing at a fast pace, and the government’s stimulus measures could help breathe life into the industry. So despite some weakness this year, GM looks set to do better in China going forward on the back of some smart strategies.
And going further it has some key launches slated for the next four to five years.
A CROWDED MARKETPLACE
Now for the bad news – despite its position at the top of the Chinese market, GM is still going to have to make a massive effort if it wants to gain significant ground in China‘s luxury car market.. That effort will cost billions of dollars, and will be against well established competitors, such as Toyota, Ford, and of course the Germans.
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The first two rivals can be beaten – .Toyota’s Lexus brand is a well-established and credible luxury competitor in other parts of the world but lingering anti-Japanese sentiment from last year’s China-Japan territorial clash continues to hurt Toyota.
Ford is doing well in China by positioning its well-equipped mainstream models as premium offerings. But, true luxury cars are something else and efforts to resuscitate its Lincoln brand could take years to gather steam.
Of course, the German carmakers are another matter – between them, in 2012, BMW, Daimler’s Mercedes-Benz brand, and Volkswagen’s Audi brand controlled almost three-quarters of the market. Faced with this, GM has found that sales of its Cadillac have suffered.
In the eyes of Chinese taste makers, the Cadillac doesn’t have street cred when compared to its German peers. The ATS and all-new CTS will hit the Chinese market over the next couple of years, which will mean Cadillac’s sales should pick up steam. The ATS compact sedan could also help with ‘cred’ factor. However, this is only an entry-level luxury car. GM will need to produce more. And even years of careful marketing may only result in a third or fourth place in this crowded Chinese marketplace for luxury cars.