General Motors Company (GM) Plans Its Growth Amidst A Tight Race In China

The road ahead – stay ahead in the race
China is an extremely crucial market for the top US automaker given the long term growth prospects that this emerging economy offers. The carmaker is heavily investing in the emerging market and has a five-year plan to spend $7 billion as part of its aggressive expansion strategy. The company is building a third production unit to enhance its total manufacturing capacity to 2 million units per year.

In addition, GM has set an ambitious goal of increasing sales by 75% to 5 million deliveries by 2015. The company along with partner SAIC is said to start two assembly plants in 2014 so that they can achieve the target of 5 million units. However this would be capable of making around 4 million vehicles which is still below the set target. So merging with under-operating assembly plants is the next viable option. According to a Bloomberg article, sources who requested anonymity said that the Detroit maker also plans to acquire struggling automakers in the mainland with the assistance of local partner SAIC Motor Corp. to strengthen its hold and attain the target.

Concluding thoughts
China is an extremely attractive destination for the automaker where it experienced 11.3% growth in 2012 especially when the European outlook is dull. Auto sales in China rose 4.3% to 19.3 million vehicles in the past year, out of which GM accounted the sales of 2.84 million vehicles despite restrictions imposed by some cities to control traffic overcrowding and pollution. According to the China Association of Auto Manufacturers this year the industry is expected to increase 7% to cross the 20 million mark for the first time. The automaker should benefit from the growth in China given its dominance here. Other than this GM also stands to gain from the ongoing clash between China and Japan. Moreover, the emerging nation will also help the automaker to compensate for its European losses and offer an extremely lucrative market with long term growth potential.

The article This Automaker Plans Its Growth Amidst A Tight Race In China originally appeared on Fool.com and is written by Rajesh Marwah.

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