GM Chinese venture to build $1 billion plant in Chongqing

Wed Nov 28, 2012 1:03pm EST
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By Ben Klayman

(Reuters) - General Motors Co (GM.N: Quote) and its Chinese joint-venture partners said on Wednesday they plan to build a $1 billion auto assembly plant in the city of Chongqing as the GM group bids to remain the leader in the world's largest auto market.

GM, SAIC Motor Corp (600104.SS: Quote) and Wuling Motors Holdings Ltd 0305.HK said they will begin construction of the plant early next year, pending government approvals. The 6.6 billion Chinese yuan ($1.06 billion) first phase is scheduled to start in 2015.

The plant in southwestern China will have annual production capacity of 400,000 vehicles, but the partners did not disclose what vehicles will be built there. It also will have the capacity to build 400,000 engines annually, a GM spokesman said.

"It's a numbers game," J.D. Power and Associates senior vice president John Humphrey said. "They're doing a phenomenal job, the market continues to grow, vehicle penetration is still so low, GDP per capita continues to increase and the west of China is where a lot of the action is going to come going forward.

"Having production further in the western part to get a foothold there and penetrate the tier two and three and four cities makes perfect sense for them," he added.

The new plant is part of SAIC-GM-Wuling's push to reach a production target of 2 million vehicles per year by the end of 2015. GM invests $1 billion annually in China.

Chongqing, one of China's largest cities, is home to a plant operated by Ford Motor Co (F.N: Quote) and its Chinese partner Changan Automobile Co(000625.SZ: Quote).

GM, whose Chinese joint venture began building vehicles in 1999, had a leading 14 percent of China's market of 18.5 million vehicles last year - just ahead of Volkswagen AG (VOWG_p.DE: Quote), which also counts SAIC as a partner.   Continued...