Wally Edgar Chevrolet - GENERAL MOTORS Strengthens China Portfolio.

Nov. 29, 2010 - PRLog -- BEIJING (Reuters) -- GENERAL MOTORS Co. unveiled the first model of its newly created Baojun brand, as it targets China's third- and fourth-tier cities to boost sales.

The Baojun 630, which rolled off the production line at SAIC-GM-Wuling's assembly plant in southern China, is the first of a series of models that combine GM technology with its partner's low-cost manufacturing.
GM has yet to announce the new model's price, but executives have said it will be "very competitive."

The Baojun brand, which builds on the success of the CHEVROLET New Sail, is a direct challenge to domestic automakers such as BYD Co. and Zhejiang Geely Holding Group, which dominate smaller cities with affordable models.
"Those big coastal cities are rapidly becoming less than a quarter of our business, and the real growth is in what we call tier-three and tier-four cities," said Terry Johnsson, vice president of GM's China operations.
"It wouldn't be unexpected to see 60 percent of [our] business in tier 3 and tier 4 cities (in five years)."

GM and its partner SAIC Motor Corp. had started to work on a new passenger car brand even before the launch of the New Sail, which is priced as low as 56,800 yuan ($8,600). The New Sail has been a hot seller since its debut in January.
While continuing to reap profits from pricier Buick and Cadillac models in wealthy coastal cities, GM has stepped up its presence in inland areas.

Meanwhile the amazing growth in the Chinese auto market is raising questions about it's sustainability from Detroit's global supplier base.  

DETROIT (Reuters) - Production capacity in China's fast-growing auto industry could more than double by 2020, but a surge beyond that level could swamp the Chinese market, warned the CEO of U.S. supplier BorgWarner Inc.
BorgWarner projects Chinese auto production could grow to 30 million units by 2020, and other analysts predict China's capacity could grow to 40 million units.
But there may not be enough Chinese buyers to snap up all those vehicles, said BorgWarner CEO Timothy Manganello.

As a result, Chinese automakers could export their excess vehicles to Europe, North America and Asia, a move that would put downward pressure on world auto prices.
"They're (Chinese automakers) going to try to take that capacity and try to export it, which will create a perfect storm in North America or Europe, because we already have some excess capacity," Manganello said during Reuters' automotive conference in Detroit. "It's going to create a fairly unique tension within the global auto industry."
But ramping up production to make 40 million cars could also backfire on Chinese automakers, leaving them with too much supply and few buyers, Manganello added.
"Even the Chinese (automakers) say if they end up with 40 million units of capacity, they don't know if they can sell 40 million units inside China."

And that could trigger a wave of consolidation among Chinese automakers, Manganello said.

SOURCE:Auto News China/Reuters

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