GM to assemble 1.3m car units in China by 2007
(Agencies)
Updated: 2004-06-07 16:25

General Motors Corp. plans to invest $3 billion in China over the next three years, stepping up its rivalry with Volkswagen for dominance of the world's fastest-growing auto market.

Chinese workers working on an assembly line of Buick at Shanghai General Motors factory in Shanghai, China, in this May 20, 1999 file photo. General Motors Corp. says it plans to invest US$3 billion in China over the next three years in an aggressive expansion despite worries that the fast-growing auto market may be headed for a slowdown. [AP]

"With the world's fastest-growing vehicle market, success in China is crucial to GM's global success," Phil Murtaugh, chairman and chief executive of General Motors China Group, said in a statement released Monday.

The overall vehicle assembly capacity for GM vehicles in China is to increase from 530,000 units a year to 1.3 million units by 2007. The auto financing arm, Shanghai Automotive Industry Corp., would be the first such joint venture for China.

The funds for the $3 billion in new investments will come from GM's joint ventures in China. That means GM needs to boost its profits here at a time when car prices are falling rapidly as competition heats up.

Last year, GM posted $437 million in net profits from its China operations.

GM said it plans to introduce nearly 20 new and upgraded products, including luxury vehicles, in the next three years, most made in China. Among those will be several Cadillac models, to be assembled at Shanghai GM with parts imported from North America.

The company said it expects such initiatives to open up jobs and business opportunities in North America and China.

GM and Chinese partner SAIC plan to build an advanced prototype lab to test noise and vibration.

In the first quarter, GM and its partners sold roughly 178,000 vehicles in the Chinese mainland, a 56 percent jump from the same period in 2003.

But while sales of foreign-branded autos have remained strong, a flood of investment by global automakers, and aggressive expansion by many private Chinese auto companies, have been raising worries that the market may soon face a glut of new cars.

GM's announcement was the latest in a series of high-profile investments for the China market.

Last year, China's leading foreign automaker, Volkswagen AG, said it would invest another $7.39 billion in China. DaimlerChrysler AG signed a $1.23 billion deal with its partner Beijing Automotive Industry Holding Co., and Nissan Motor Co. has a $2 billion joint venture in China.

Last year, sales of locally made cars soared 75 percent over a year earlier to nearly 2 million units. That growth slowed to 44.5 percent in the first quarter over the same period a year earlier, with sales of 567,000 units.

To meet strong demand for its products, GM plans to increase the capacity of its Buick-making joint venture in Shanghai to 450,000 units a year in 2005, from the current 200,000 units.

That venture will also start manufacturing the Cadillacs. GM's minivan joint venture with Shanghai Automotive and Wuling Automotive is in the process of expanding its manufacturing capacity to 336,000 units a year in 2006 from 200,000 units a year.