As we are going through Dunne’s book, this would be very appropriate. This January, GM saw record sales in China, being the “best month ever in the country”. 310,765 GM cars were sold in a single month, a 16% increase from its previous “record month”. Among these, 154,200 were sold in Shanghai alone (Bomey).
Now, GM plans to increase its sales by 75% by 2015 (Higgins). Unnamed people have given out GM’s “yet-private” plan to deal with another automaker to reach this goal. Gm plans to start up a two new assembly lines and about 400 new stores in China this year (700 new stores were added in 2012). With this, GM is opening up a lot of job opportunities for the locals. Will GM be successful in its objectives? We will have to wait and watch…
Much of the evidence provided in these articles points to a high probability of success in China for GM. The Chinese automotive market seems to be largely untried. One of the most indicative statistics was that “627 in 1,000 in the U.S. own a car and 517 in Germany, according to the World Bank, in China, it’s only 44.” Albeit a lower percentage of Chinese citizens will have the means or motivation to buy a car at the present than US or German counterparts, the room for growth is staggering. As long as GM maintains an edge over its competitors (Volkswagen is in tight competition) they should stand receive large returns for quite a while.
Another interesting aspect to this story is that Buick is still the strongest-selling brand in China – selling “six times as many vehicles in China as it does in the U.S.,” and “recorded sales…up 21.7%.” In this regard, GM greatly benefited from Shanghai’s familiarity with the citizen’s automotive demands and initial guidance.
I also was very interested to see that GM’s most popular brand out of all of its portfolio was Buick. GM’s relationship with Shanghai, and its beginnings described in Dunne’s book seem to have truly benefited the company in making progress in the most appealing market in the world. What I think is so cool is that we can read stories in the paper such as this and after reading background books such as “American Wheels, Chinese Roads”, we know much more about what has gone into such profitable sales endeavors.
Don’t pay too much attention to #1 vs #2: either is a nice position to be in.
Note that half of all GM sales are in Shanghai. With hindsight, GM was very fortunate that their initial partner was there rather than in some smaller market, because these numbers hint that “buy local” persists, if only because expanding the dealership and (maybe more important?) service network beyond Shanghai is an endeavor that will take years.
Finally, margins will shrink, have already shrunk. Firms that add capacity faster than sales are placing a big bet that the market won’t slow and margins disappear. A firm with a large market share is in a better position — one more factory doesn’t require that GM eat into anyone else’s share, only that they maintain their share. It’s easy to miss the risk reduction from being early, when you know growth can’t continue much longer at double-digit rates. (GM’s current 11% pa growth = less than 7 years to double sales.)