With Baojun, GM China has head-start in growing no-frills car market

Mon Jul 18, 2016 9:38pm EDT
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By Norihiko Shirouzu

LIUZHOU, China (Reuters) - General Motors has enjoyed first-mover advantage in China's cheap, no-frills car market as foreign rivals focused on selling higher-end cars in the country's wealthier mega-cities.

But now, with sales growth in Beijing and the biggest cities stalling, other global car makers are looking more closely at selling affordable, basic cars in smaller cities and rural areas where local brands such as Geely and Great Wall Motor, and GM, dominate.

GM has been almost alone among the big foreign car makers to see the potential for selling passenger cars to the developing so-called tier-three, -four and -five cities where buyers can now afford to upgrade from noisier, uncomfortable, rear-wheel drive vans. It estimated several years ago that China's entry car segment could grow to 7 million cars a year - some way bigger than Japan's entire autos market.

GM's China chief Matt Tsien said some automakers are seeing "negative growth" in some of China's bigger cities. "But when you go into tier-three and -four cities, we saw double-digit growth for the whole of last year. It's still growing at double-digits this year and will continue," he told Reuters.

GM launched its low-end Baojun brand in 2011, catering to the needs of rural and smaller city Chinese, often buying their first car. This was no accident, Tsien says, as GM aimed to be in all corners of China, "a market of many markets," from the get-go. Baojun looks on track to sell more than 600,000 vehicles this year.

Others launched basic brands around the same time, but for most this was a half-hearted effort in part to meet a Chinese government requirement that they set up brands with local partners. After several years, BMW, Toyota Motor and Honda Motor have each launched just one or two models.

That is now changing.

Nissan Motor China chief Jun Seki told Reuters in April the company is putting more effort into its Venucia brand, with some big design changes. Nissan launched Venucia in 2012 with its China partner, but mainly sold retired Nissan models with few significant changes as 'new' Venucia cars. It sold 122,000 cars last year.   Continued...

Employees work at a production line inside a factory of Saic GM Wuling, in Liuzhou, Guangxi Zhuang Autonomous Region, China, June 19, 2016. REUTERS/Norihiko Shirouzu