GM anticipates price pressure in China

02 November 2012

BEIJING: General Motors, the automaker, has seen its market share increase in China, but believes pricing pressure is likely to be a significant factor impacting the industry going forward.

During the year to date, the company – which sells local marques such as Baojun and Jiefang alongside global brands like Buick and Chevrolet – has logged sales growth of 10%, reaching a record 2.1m units.

Despite this, Daniel Ammann, the organisation's chief financial officer, argued on-going "pricing pressure" was playing an important role in the country, partly due to intensifying competition.

"It's no secret the China market is growing more slowly than it had been. We're getting a bit more than our share of that, which is encouraging," he said on a conference call with analysts. "But there is pricing pressure in that market, and we expect to see that continue to come through."

More specifically, the firm's Chinese market share hit 14.4% in the last three months, up from 13.9% quarter on quarter, albeit still lagging the recent high of 15.2% posted in the first quarter of this year.

By way of comparison, GM holds a share of 17.6% of the US market and 17.1% in Brazil, measured against 11.6% in the UK – a figure matching its global total – and just 2.7% in India.

One contributor to its Chinese growth has been that many buyers are boycotting Japanese cars as a result of the rising tension with Japan linked to two islands in the East China Sea.

Toyota, for example, reported that its Chinese sales fell by 44% in October to 45,600 cars, following on from a slide of almost 50% in September. Ammann, however, said the longer term outlook was unclear.

"We haven't seen any sort of fundamental change at this point. I mean, I think we're getting a little bit of benefit, as are others," he argued. "We're not looking at that as a permanent trend at this point in time."

"I think it's a sort of temporal disruption, and we'll see how it develops," he added. "It's a blip from our perspective at this point. We'll watch how it transpires."

Shifts within GM's portfolio may also have been at work, especially towards Wuling vehicles made via its joint venture with SAIC and Lizhou Wuling Motors, encouraging a 0.8 point fall in margins to 9.7%.

Ammann said "the mix of Wuling versus Chevy, Buick and, increasingly, Cadillac ... has moved a little unfavourably for us", but suggested moves to lower cost vehicles were present category-wide.

Data sourced from Seeking Alpha; additional content by Warc staff