GM's Baojun lineup in China could expand quickly

LIUZHOU, China Wed Apr 20, 2011 8:41pm EDT

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LIUZHOU, China (Reuters) - Even before General Motors Co (GM.N) launches its first vehicle under the new Baojun car brand in China, the local venture is eyeing other vehicles it could add to its lineup, executives say.

Introducing the Baojun brand is a key element in GM's plans for it to double its sales in China, its single largest market, over the next five years.

The low-cost brand gives the U.S. automaker a way to compete in the fast-growing market for new cars in smaller Chinese cities where first-time buyers are buying small cars with prices under $10,000.

The plan is for the Baojun line to compete against domestic Chinese rivals such Chery Automobile, Geely Automobile Holdings Ltd (0175.HK) and Warren Buffet-backed BYD Co Ltd (1211.HK).

GM estimates annual sales in the low end of China's market at around 5 million vehicles, making it larger than the market for cars in France and Britain combined.

As a first step, SAIC-GM-Wuling Co Ltd, one of GM's joint-ventures, will begin selling the Baojun 630 small car within the next few months.

The Baojun 630 compares in size to the Chevy Cruze and will be priced for the equivalent of $10,800 to $13,900.

The next step could be to shift a now-discontinued version of the Chevy Spark minicar to the Baojun brand under its established Chinese model name, the Lechi, one executive said.

"We haven't officially announced the transition of (Lechi) to (Baojun)," Shanghai-GM-Wuling vice president Matt Tsien said during a tour for reporters visiting a plant run by the joint-venture in southern China.

Lechi, which means "happy driving" in Chinese, was introduced as the Chevy Spark in China when the Shanghai-GM-Wuling plant began making it in late 2003.

The Lechi starting price is just under $6,150.

"The future is Baojun. Passenger vehicles will center on the Baojun brand," he said.

Other automakers introducing local brands include Japan's Nissan Motor Co Ltd (7201.T) and Honda Motor Co Ltd (7267.T).

France's PSA Peugeot Citroen (PEUP.PA) plans to join them and BMW's (BMWG.DE) chief executive said last month that the German automaker was in talks for a local brand. The Chinese partners for Ford Motor Co (F.N) and Hyundai Motor Co (005380.KS) also have expressed a desire to join that club.

GM and its partners are pushing ahead aggressively with Baojun, with initial plans for 150 dealers and more to come.

AGGRESSIVE GROWTH PLANS

Some analysts have warned, however, that local brands like Baojun could eventually become threats to their parent brands if they compete more against established models over time.

GM this week announced aggressive plans to double its overall sales in China to around 5 million units over the next five years. GM's sales in China - which Chief Executive Daniel Akerson in February called "a crown jewel in the GM universe" -- last year rose about 29 percent, although industry and company growth have slowed so far this year.

GM claims an industry-leading market share in China of 13 percent.

Wuling, a major player in the market for small commercial vehicles, also launched last fall a higher end mini commercial van, called Hongguang, that it hopes will attract some Chinese consumers looking for a family wagon.

The vehicle sells for between $6,800 and $9,200. Tsien said the joint venture looked at that as a possible Baojun vehicle at one point and could reconsider adding the van to the Baojun line-up.

Shanghai-GM-Wuling sold 1.23 million vehicles last year, but most were commercial vans and trucks, led by the Sunshine van that accounted for about 700,000 sales. Lechi sales rose about 30 percent last year to 77,800.

(Reporting by Ben Klayman in Liuzhou; Editing by Tim Dobbyn)

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