Why GM Is a Must Buy
China is still the largest car market in the world despite the meltdown of its economy over the past 2-3 years. Before that, it used to grow at double digit rates through a period that included the recession years toward the end of the last decade. Then came 2014 when auto sales grew at only 7%, followed by just 4.7% last year. Through the next 5 years, the top selling company in the word, General Motors (GM), expects Chinese auto sales to grow 3% to 5% a year until 2020, which is why it is looking to aggressively tap this market.
General Motors is upbeat regarding China currently.
The segments under that category at this time are the luxury car and the crossover segments. Last year, the sales of sport-utility vehicles and crossovers in China jumped 52% as compared to the previous year. Further, the sales of luxury cars in China rose more than 10%, according to data from PWC’s consulting group. But, one key area that GM is looking to tap in China is that of electric vehicles as this is a booming segment of the country’s auto market. Let’s see how.
GM in the Electric Vehicle segment
The Chinese government is focused on reducing emissions from the vehicles plying on its roads, which happen to be the most car-crowded roads in the world. The best way to achieve this goal is by increasing the number of green-energy vehicles on Chinese roads.
To pursue this objective, the Chinese government has been giving generous incentives on the manufacturing, sale, and purchase of electric vehicles in the country. This has resulted in terrific traction for EVs in the country. In fact, the sales of electric and hybrid vehicles, including cars and buses, quadrupled in 2015 compared to the previous year.
As such, it is not surprising to see that General Motors has already identified this segment as its priority segment. The company has announced its plans to launch more than 10 new green-powered vehicles in China under the Chevrolet, Buick, Cadillac and Baojun brands over the next five years. GM President Dan Ammann believes that China will also become the largest EV market soon.
“In fact, over the next five years, we will roll out more than 10 new energy vehicles in China, including several models for Buick. That includes full hybrids, plug-in hybrids and extended-range electric vehicles.” said Larry Nitz, GM executive director of Global Propulsion Systems this week.
“The first one to be rolled out will be the Shanghai-built Cadillac CT6 Plug-in Hybrid Electric Vehicle, which will go on sale later this year.” The Cadillac brand falls under the umbrella of SAIC-GM, one of the company’s joint ventures in China, which is also responsible for the Buick and Chevy brands. The CT6 has an advanced version of the drive unit that is used in the Chevrolet Volt, with some improvement and increased power. It will be up against the German sedans and will be sold in limited volumes. It will also be exported to the U.S.
One of GM’s non-plug-in hybrids, the Buick LaCrosse Hybrid, was unveiled in mid-April this year. This car is a hybrid derivative of the Chevrolet Volt since it carries an identical powertrain to the Malibu Hybrid that is sold in the U.S. But this one is being pitched specifically as a Chinese market car. However, the power train of the hybrid version of the LaCrosse is much weaker than its 300-hp conventional version, which casts doubts on the prospects of the former. Although the company has stated that the LaCrosse Hybrid is only for sale in China, some industry watchers don’t rule out the possibility of its export to North America.
What other EVs will be launched and when each one of them will be launched is not yet known. However, GM will continue with its engineering strategy of sharing various hardware and software technologies across vehicle lines. This drives the efficiencies at GM and takes care of customer affordability too.
GM has a solid 5 year plan in place for gaining more market share in China. It has identified the EV segment as one of the few growth segments. However, even its competitors must be having their eyes set on the same. So that’s not the competitive advantage for GM.
But the fact that the company has a separate strategy in place for that segment and that as many as 10 plug-ins will be launched in China itself could deal a big blow to the competition, local and global alike. Further, the efficiencies that its engineering strategy affords GM and the inclusion of new technology could be able to attract more drivers in its biggest market.