By Frank Holmes
With a middle class that could balloon to 1.4 billion people by 2030, China has become a lifeline for automakers looking to keep their profits afloat in a weak global economy. Through October 2011, more than 15 million new vehicles have been purchased in China, according to ChinaAutoWeb*. That’s about 3 percent higher than a year ago.
Toyota, Audi, Volkswagen, BMW and Nissan are all searching for ways to tap into this fast-growing market.
One of the country’s biggest success stories is General Motors (GM), which has positioned itself as one of the most recognizable and highly sought after cars in China. Shanghai-GM topped October’s list of the top-ten largest automakers in China with more than 100,000 cars sold, according to data from the China Passenger Car Association. With the help of a joint venture with China’s SGM Wuling, GM is expanding its operations into emerging markets like China and India.
The additional revenue streams from these growing middle classes are helping GM retake the title as the “world’s leading auto manufacturer,” a title it had given away to Toyota in 2008.
GM sold nearly 550,000 cars in China in 2010, more than triple its sales in the United States. The car company expects its global sales to expand by as much as 10 percent in 2012, according to Bloomberg*. The company has also announced plans to introduce its new Chevrolet Volt plug-in hybrid car in eight cities throughout China.
A recent article in The New York Times* says, “The American carmaker General Motors has found the Chinese market to be a life-saving opportunity for the reinvention of the Buick brand.” Buick, once called “damaged brand” by a GM executive, leads China in luxury and subcompact car sales and the Buick Excelle is the country’s top-selling sedan.
While U.S. drivers often stereotype Buick motorists as “drivers who have a soft spot for the early-bird special,” Buick is “one of the hottest luxury cars in China.”
GM’s rise to stardom didn’t happen overnight. The luxury brand was a proud favorite of the last Chinese Emperor, Pu Yi, who was a fond owner of not one, but two Buicks. Experts suggest GM’s longstanding legacy has helped America’s oldest surviving automobile to prosper in China.
GM isn’t the only company speeding up deliveries to China. GM, Volkswagen and Nissan are on schedule to collectively deliver more than 4 million vehicles to China in 2011, according to Bloomberg. In the past year Ford, Nissan and Chrysler have announced business plans to increase their annual auto output to China.
China’s car culture is still developing and has plenty of room to grow. The country still has a low rate of vehicle ownership and the total number of cars sold per capita is 13 times smaller than the U.S., according to research from McKinsey. In addition, nearly 80 percent of Chinese car purchases will be made by first-time buyers.
As millions of Chinese consumers open up their wallets for their first vehicle purchase; foreign automakers continue to position themselves to take advantage in this accelerating marketplace.
About The Author - Frank Holmes is CEO, Chief Investment Officer of U.S. Global Investors and the co-author of The Goldwatcher. (EconMatters author archive here.)
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.
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