GM pushes new strategy as Chinese tastes shift to family vehicles
SHANGHAI/DETROIT, July 17
SHANGHAI/DETROIT, July 17 (Reuters) - General Motors Co is responding to surging Chinese demand for large family vehicles, a trend likely to deepen as Beijing eases its one-child policy, by redesigning its distribution network to speed up sales of its Baojun family range.
Sales in China of family-sized multipurpose vehicles or MPVs, surged 55 percent during the first half, far outpacing the 8.4 percent growth in the overall auto market.
The change in strategy is also a response to increased competition in the country's rural markets and lower-tier cities where newly emerging middle-class consumers are clamoring to buy low-cost vehicles.
"In general, as incomes rise and as the one-child policy has been relaxed, the trend is going to be toward more passenger-like characteristics, more refinement, more multi-purpose and more family-oriented functional vehicles and that's the direction we want to go," said Ray Bierzynski, the outgoing vice president of GM's venture with SAIC Motor Corp Ltd and Wuling Automobile Co.
In an effort to establish a dominant presence, GM and SAIC, China's biggest automaker, have begun combining sales channels of its two largely-China-only brands.
The brands include the 30-year-old "workhorse" microvan brand "Wuling" and a newer passenger car brand called "Baojun". GM hopes to create a limited number of what it calls "dual-brand stores" where consumers could buy vehicles from both brands.
GM's move is a result of the competition it faces from similar brands like Nissan Motor Co's "Venucia", which sells for as low as 42,800 yuan ($6,900), and those from Volkswagen AG, Toyota Motor Corp and Honda Motor Co.
The change is also in response to a shift in consumer preferences that now favor more family-oriented multi-purpose vehicles (MPVs) instead of bare-bones micro cargo vans priced as low as 30,000 yuan ($4,800).
Wuling, the main brand operated by SAIC-GM-Wuling, one of GM's key joint ventures in China, has been a huge success story since GM invested in the company in 2002.
It sold 1.48 million vehicles last year, up 11 percent from 2012 and accounted for almost half of the overall volume GM generates in China each year with its joint-venture partners. GM and its partners sold 3.2 million vehicles in 2013.
NEED FOR SPEED
Three years ago SAIC-GM-Wuling launched its Baojun brand, but its growth has slowed in recent months because it lacked family vans. Baojun sold 37,880 vehicles during the first half of this year, down 16 percent from a year earlier.
To help Baojun regain momentum, SAIC-GM-Wuling a year ago gave 30 Baojun retail outlets an opportunity to sell Wuling's key multi-purpose van, called the "Hong Guang S", which starts at 61,800 yuan.
In April it allowed certain Wuling stores to sell a Baojun hatchback called the "610", available for as low as 65,800 yuan. As part of that move, SAIC-GM-Wuling plans to allow Wuling stores to sell another Baojun model called the "730", a seven-seat family van due to hit showrooms in August.
GM China chief Matt Tsien said SAIC-GM-Wuling is experimenting with the dual-dealer model because Baojun, with 480 stores in operation now, "hasn't expanded as rapidly as we would like."
SAIC-GM-Wuling's Bierzynski, who is due to retire at the end of July, also said increased competition in China's rural markets was a factor driving the company to take advantage of Wuling's extensive market reach.
The group has some 1,500 of its 2,000-plus sales outlets in so-called Tier 4 to Tier 6 cities with smaller populations than Tier 1 cities like Beijing or Shanghai.
While GM currently has no plans for a complete merger of the distribution channels of Baojun and Wuling brands, Bierzynski said SAIC-GM-Wuling plans to boost the number of dual-brand stores "step by step" wherever it makes sense.
Going forward, "the focus will be on dual dealer," GM China chief Tsien told Reuters.
($1 = 6.2075 Chinese yuan) (Editing by Norihiko Shirouzu and Matt Driskill)
- Ukraine president accuses Russian soldiers of backing rebel thrust |
- Video shows Islamic State executes scores of Syrian soldiers |
- In town halls, U.S. lawmakers hear voter anger over illegal migrants |
- Comedian Joan Rivers, 81, rushed to New York hospital
- U.S. air strikes on Syria would face formidable obstacles