GM uses promotions in China

31 August 2011

BEIJING: General Motors, the automaker, is making targeted use of promotions to enhance its position in China.

The company operates a joint venture in China with the Shanghai Automotive Industry Corporation, and this division was responsible for roughly half of its 2.4m units sold locally in 2010.

Its Wuling Sunshine minivan was one of the most popular vehicles in the country in 2010, and GM cut the price of this model from 33,000 yuan to 28,000 yuan earlier this year.

"We made some short-term focused promotions to help the overall market situation," Matthew Tsien, a vice president at SAIC-GM-Wuling, told Bloomberg. "We don't expect it to be a long-term issue. China is looking at very robust growth in the auto industry."

JD Power & Associates, the consultancy, estimated GM takes 49% of the minivan market, but also suggested its joint venture makes a 2,000 yuan profit on each minivan, a relatively modest sum.

"We believe the minibus will remain as its main business for the long term," Jenny Gu, an analyst at JD Power, said.

"The margin is quite low. It's not like the middle segment or luxury cars, where margins are very high. GM does not rely on the minibus for profit. They only contribute volume."

SAIC-GM-Wuling recently launched the Baojun brand of passenger vehicles, and General Motors has announced plans to roll out 60 new and upgraded models across its portfolio in the coming five years.

The China Association of Automobile Manufacturers has predicted total auto sales will rise by 5% this year, measured against growth of 32% in 2010, an expansion aided by government subsidies.

Ashvin Chotai, the managing director for Intelligence Automotive Asia, added that minivan sales could be "tough" in the next 12 months.

"Incentives brought forward buying in a very dramatic fashion in 2009, 2010, and now we are seeing a lack of pent-up demand," Chotai said.

Data sourced from Bloomberg; additional content by Warc staff