Russia fills gap for General Motors as China sales slow

Mon Jul 9, 2012 4:30am EDT
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By Norihiko Shirouzu

BEIJING (Reuters) - China is no longer the eye-popping growth story for General Motors Co (GM.N: Quote), but robust sales in Russia and other emerging markets quickly filled the gap during the first half of this year, a senior company executive told Reuters.

"While China is still strong… it is no longer the gravity-defying growth as we have seen in prior years," Tim Lee, head of GM International Operations, said in an interview late on Friday.

Middle-class Russian consumers have come to GM's rescue, cushioning the impact of the slowdown in China that has led to a sharp rise in inventory and the resulting slide in profitability for many auto makers, along with the difficulty GM is facing in jump-starting operations in India and Southeast Asia.

GM's corporate reputation was "pretty low" in Russia, "but today we're back and really leaning into the market," Lee said. Of course, China has been a great performer for GM over the past decade and is still offering notable growth. "But I would put Russia in the same breath as China."

In the just-ended first half of 2012, GM sold a total of about 136,400 vehicles in Russia, up 21 percent from the same period a year ago. While that volume is still a fraction of the 1.4 million vehicles GM sold in China during the same six months, the sales growth rate for GM Russia was twice faster than China, where first-half sales increased 11 percent from the year-ago period. Just two years ago GM's China sales were growing at an annual pace of almost 50 percent. YES THIS IS FINE.

Those results, along with what Lee described as the company's strong presence in the Middle East region, South Korea and Australia, drove overall sales for GM International Operations to about 2 million vehicles in the first half, against 1.8 million sold in the same 2011 period and accounting approximately for 40 percent of GM's overall new vehicle sales, according to GM.

GM International Operations is a GM unit based in Shanghai and oversees a host of emerging markets in Asia, Africa, the Middle East and Russia, though the division's responsibility includes Australia, New Zealand, and Chevrolet Europe. The company's European unit Opel and operations in South America are not part of GM International Operations.

GM's sales results speak to "a very well balanced strategy" the company is executing in emerging markets around the world, said Yale Zhang, head of Shanghai-based consulting company Automotive Foresight.   Continued...