General Motors in China: Coping with the Changes in the Automobile Industry
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Case Code: BSTR400 Case Length: 17 Pages Period: 2008-2011 Pub Date: 2012 Teaching Note: Not Available |
Price: Rs.500 Organization: General Motors Industry: Automotive Countries: China Themes: Internationalization, International Business, Industry Analysis |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
GM in China
Until the 1990s, GM mainly operated in North America and Europe. Plummeting sales in the US auto market and the slowing down of the economy in western Europe prompted GM to seek its fortunes in the emerging markets of Asia Pacific. Moreover, GM's sluggishness in coming out with innovative models and new product development paved the way for Japanese manufacturers to eat into GM's market share in the US auto market...
Success in the Middle Kingdom
GM China had its share of troubles when it entered the Chinese auto market. The company had to face some restrictions like the Beijing auto market demanding that GM China focus only on the expensive Buick Regals. In addition, GM's research went waste since the government restricted the kind of cars it could manufacture for the Chinese auto market. Moreover, the government regulations that changed at short notice and having to manage the size and complexity of its operations in China also added to its troubles...
Threat from Competitors
The Chinese auto market offered great potential to domestic as well as global players due to the strong economy. Moreover, affluent Chinese consumers were attracted to innovative car models from foreign automakers. Sensing the potential in the market, several global players were rushing into the market. Commenting on the potential of the Chinese auto market, Richard G Wagoner (Wagoner), the then chairman and CEO, GM, said, "It's not just because of the challenges in the other markets. It's a great growth opportunity. It has redefined what a great growth opportunity is. We thought that an industry of 300,000 units that can grow 15% a year is a great growth opportunity. But take a market that is 5 million units and growing at 30% or more. That's like an electronics industry. India and Russia have great opportunities, but I don't think they will grow this fast"...
An Opportunity or Threat for GM in Future?
While GM was heavily dependent on the Chinese auto market to bail out its flagship North American operations, some industry experts were of the opinion that GM China could one day be owned by Chinese automakers. David Cole, chairman of the Center for Automotive Research, said that was a distinct possibility since the Chinese had a lot of money and were looking at ways to invest it. Commenting on such a possibility, Bob Schulz, automotive credit analyst at Standard & Poor's , said, "Assuming there's no government restrictions on something like that, anything is possible"...
Change in China's Automobile Industry Structure?
After conquering the Chinese automobile market and ensuring that its business survived despite several experts suggesting that the company would be sold to some Chinese player, GM China continued with its penetration of the market. In May 2009, GM China announced its plans to launch a car targeting the middle class price conscious consumers in a bid to offer its products to consumers residing in Tier II and Tier III cities. Subsequently, the company made investments in research and design facilities with its Chinese partners and launched its first small car for middle class consumers, the Baojun 630. The car was showcased at the Shanghai auto show in April 2011... ..
The Road Ahead
In its 2010 annual report, GM stated that the company held the leading position in the BRIC (Brazil, Russia, India, and China) markets for FY 2010. According to GM, the BRIC markets collectively were expected to grow by 12 million vehicles by 2015, presenting the biggest growth opportunity for GM from 2010-2015. GM's North American operations were also expected to provide additional growth potential to the company as the market was recovering from the economic crisis...
Exhibits
Exhibit I: GM China's JV in Chinese Auto Market
Exhibit II: Vehicle Sales of GM JVs in China (US$ in millions)
Exhibit III: A Note on the Chinese Automobile Industry
Exhibit IV: Trefis Forecast for GM China
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