The change in the macroeconomic openness of China had seen a growth in foreign companies coming to China to do business. The private sector had grown through the privatization of state-owned enterprises and new firm entry had been the result of regulatory changes. As a result, the auto-industry had started to see some growth. This gave way to foreign players to come into China. Among the foreign auto-makers are VW, Citroen and Daimler.
GM had considered China not only a huge market but also an entry point to the Asia-Pacific region. General Motors knew it had to achieve a higher economic performance than both foreign and indigenous competitors to be successful. Prior to GM coming starting operations in 1997, the auto industry in China had been dominated by Volkswagen selling Old car models with weak features. GM had a strategy of introducing New Cars with state-of-the-art features which worked to its advantage. GM started with Buick and expanded to other brands like Chevrolet (Low end) and Cadillac (Premium brand) which was initially imported.
Fast forward 20 years since GM started operation in China, car sales by GM and its joint ventures had grown from 58,374 in 2001 to 366,305 vehicles (An increase of 528% – See Table 1). GM in 2017 had strong results for nearly every brand with Buick, Cadillac, and Baojun reaching all-time highs (See figure 1). To put this in perspective of how encouraging the results are, General Motors’ strongest non-Chinese competitor in the market, Shanghai Volkswagen Group (SVW), despite posting a similarly strong sale in 2017, its car sales was just 310,500 vehicles from 245,000 in 2001 (An increase of only 27%). SGM Market Share keeps growing Year-over-Year. It was 8.3% in 2001 and grew to 10.7% in 2004. SVW on the other hand keeps losing market share from 32.7% in 2001 to 15.8% in 2004.
GM had a 50-50 joint venture with SAIC. GM announced in December 2009 it turned over 1% of Shanghai GM to SAIC, thus giving it majority ownership (51%) — the 1% was valued at $85 million. SAIC is wholly-owned by the Shanghai Municipal Government and is one of the top three auto groups in China. SAIC is supported by and closely linked to policy makers that favors the partnership. SAIC have close ties with local authorities, the central government and banks giving it power to influence the course of Shanghai automobile industry cluster which in turn contribute to the development of the automobile industry in China.
GM had also kept his pledge to the Chinese Government of having a technology exchange with local workforce with expectation of becoming a significant player in China’s automobile market.
In 2014, GM announced it intends to invest another $14 billion from 2014 through 2018 to open five new vehicles manufacturing plants and support sales of just under 5 million vehicles annually. In the same time frame, GM expects to launch 60 new or refreshed vehicles, including nine new sport utility vehicles (SUV).
The driving force for GM’s gains had been SUV sales [2]. It is proving it has strategies to succeed there with SUVs and low-cost brands in the near-term, and that it’s prepared to develop the electrified vehicles necessary for the long-term. Have GM’s long term been sustainable. So far, we can say yes. GM has established itself in China by building a whole system that aimed to improve Sales, Marketing and Distribution system. GM have also built a dealership network based on practices of no-haggle pricing and emphasis on customer satisfaction. By so doing, GM aim to have firm-specific comparative advantage by having control of the supply chain which will increase customer value with solid car brands, service system that takes care of people’s problem when car’s need servicing, availability of parts so customers don’t have to wait long.
In considering the market share gained by GM since starting operations in China. GM proves that with superior technology, breadth of product line (Buick, Chevrolet, Cadillac, Wuling and Baojun), geographical scope and brand have been a contributing factor to its superior value. GM have also positioned itself with cost-saving by acquiring shares in its suppliers and other joint ventures.
In the grand scheme of General Motors’ success in China has worked very well. The strategy behind the success is simple: Offer Chinese consumers a brand that is as affordable as domestic options yet with the quality of an import. Both GM and SAIC have pegged India as the next uncharted territory to conquer. GM has shifted its global strategy to focus on China, but the fact that it relinquished its control of the Joint Venture denotes its need for money.
