The Truth About Cars » Wuling The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Thu, 24 Jul 2014 17:47:59 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Wuling GM Invests More Into Fake Chinese Brand Mon, 19 Nov 2012 11:56:48 +0000

GM added more capacity to its Chinese Baojun brand by opening a factory in Liuzhou, southern China. Plant and brand are part of the SAIC GM Wuling joint venture, where GM holds 44 percent, SAIC 50 percent, with 6 percent held by Wuling.

Baojun started with the Baojun 630, a compact sedan based on an older Buick Excelle/Daewoo Lancetti platform, later the Le Chi was added, a rebadged Chevrolet Spark. By 2015, Baojun wants to have a total of five models, Reuters says.

Baojun is one of China’s joint venture brands, which we at TTAC like to call “fake Chinese brands.” They started with the Chinese government strongly suggesting that joint ventures launch brands with Chinese identity. Allegedly, this was to produce lower cost cars for the masses, the true intent was to bring technology into Chinese hands. GM was among the first to salute and to do as the Chinese government desired. GM was followed by others such as Nissan (Venucia), and Everus (Honda).  Some companies, notably Toyota, were dragging their feet and questioned the need for a dedicated brand to target the low cost segment. Even Toyota finally caved in and will launch a fake Chinese brand with joint venture partner FAW next year. The Chinese by the way insist on calling these brands “sub-brands”, despite Baojun being  as standalone a brand as Buick.

The joint venture brands saw mixed success. Much to the chagrin of Chinese planners, the foreigners only handed outdated technology down to the joint venture brands. The Baojun brand saw sales as high as 9000 in January, in September, it was down to 6,000 units. Nissan’s Venucia brand likewise saw encouraging sales initially, which soon petered off.

On Matt Gasnier’s list of best-selling cars in China, the Baojun 630 ranked 46th in October 2012.

Brands with a Chinese identity sound like a good idea to protect against the sudden ill will against Japanese products, but it did not work out that way:  Sales of Nissan’s Venucia brand more than halved from August to September, while sales of Baojuns rose from some 4,000 in August to over 6,000 in September: Chinese car buyers are not stupid, and are well-informed Internet users. They know exactly that a Venucia is a last generation Nissan Tiida.

]]> 4
GM Buys Indian JV Stake From SAIC, Estimated Cost Pegged at $125 Million Wed, 17 Oct 2012 13:00:41 +0000

 “It’s too early to say for sure whether GM will purchase the controlling stake in HKJV, and thereby regain full control of its India business. It is unlikely that SAIC will relinquish its grip on India, just because it suddenly can’t service the capital requirements of the HKJV. Possibly, more information will become available when GM files its Q3 paperwork, or possibly later.”

As it turns out, they did.

The HKJV we refer to above is what’s known widely as General Motors India. Originally a 50-50 JV between GM and SAIC, the HKJV was established in 2009. According to Reuters, the post-bankruptcy initiative saw GM contribute

“…two assembly plants, [an] engine plant and sales network in the Indian partnership, while SAIC contributed 23.5 billion rupees. At the time of the deal, GM said SAIC’s money would allow the venture to market more products in India, particularly small cars and ultra-cheap micro minivans and buses that GM makes with two Chinese partners.”

Our own Tyler Vandermeulen, in his investigation of GM’s finances, found this nugget in GM’s 10-Q filing.

‘We were informed of SAIC-HK’s intent to exercise its right to not participate in future capital injections in HKJV. If this occurs we plan to settle the promissory note in the three months ending September 30, 2012 and provide an additional equity investment of $125 million into HKJV. As a result SAIC-HK’s interest in HKJV would be diluted from 50% to 9%. We also anticipate that the shareholders agreement would be amended such that we obtain control of and consolidate HKJV.’

Such an event has now come to pass, and GM now holds a 93 percent stake in the operation, and the first fruit of the JV, the Chevrolet Sail, is expected to launch in November, followed by the Enjoy utility vehicle. The Enjoy is based on an SAIC vehicle badged as a Wuling in China. The terms of the SAIC-GM deal were not disclosed. Based on Vandermeulen’s assesment, the deal will presumably cost GM the $125 million cited above.

]]> 8
Wuxing v.v. Wuling: Fight Of Chinese Van Makers Will Be Felt In America Mon, 21 May 2012 12:19:12 +0000

A fight between two makers of cheap Chinese delivery vans will spill over to America – in more ways than one. China’s Jonway is a small carmaker from Zhejiang Province. Usually known for cheap pickup trucks, Jonway launched the Wuxing onto China’s small van segment. That segment is ruled by Wuling, the company that has a joint venture with GM. Jonway is also ruled by an American company: Californian ZAP bought 51 percent of Zhejiang Jonway Automobile Co. Ltd. in 2011.

Wuling’s cheap breadvans rule a hot, but recently beleaguered segment in China. Wuling  Sunshine minivan was China’s most-popular vehicle last year. At 33,000 yuan ($5,215) list, the car does not make much money for GM, if any at all. “GM does not rely on the minibus for profit,” said Jenny Gu, a Shanghai-based analyst with industry researcher JD Power & Associates. “They only contribute volume.” It was that volume that helped GM dethrone Toyota last year.

Yonway wants a share of this market, and the company is not subtle about it. Says Carnewschina:

“Jonway choose Wuxing on purpose, it almost sounds the same in Chinese as Wuling and it almost means the same. Wuxing means ‘Five Stars’, Wuling means ‘Five (sharp) Squares’.”

Jonway will sell its Wuxing from 37,800 yuan on up. Last year however, Wuling dropped the price of its already cheap Sunshine to 28,000 yuan ($4,424). The segment as a whole is under pressure, the entry of new competitors with similar names is likely to spark price fights. Losing $100 per van does not sound like much, but if you sell more a million of them …

Be prepared to see the Wuxing closer to home. ZAP says that the Wuxing will be sold in the U.S. as the Shuttle G, a plug-in version will be sold as the Shuttle EV.

]]> 6
Volkswagen Encroaches On GM In China Fri, 13 Jan 2012 14:20:15 +0000

GM is casting nervous glances at its perennial antagonist in China, Volkswagen. For both, China is a strategic high ground.

  • GM sells more than a quarter of its global production in China. GM sold a record 2,547,171 units in China in 2011, which is more than the 2,503,797 units sold in the U.S.  last year.
  • Volkswagen also sells more than a quarter of its global production in China. Volkswagen sold a record 2.26 million units in China in 2011, which is twice the numbers of cars the Volkswagen Group sold back home in Germany.

“So?” I hear you say. “Both are doing great. What’s to worry?” Where shall I begin?

GM’s problem in China is that more than half of its Chinese sales are Wulings. They are made by a three-way joint venture in which GM holds a minority interest. They are cheap. A few thousand bucks buy you a Wuling Sunshine. Profits in this segment are razor-thin to non-existent. If GM currently gets much more than the bragging rights out of that deal, I will be amazed. The biggest problem: This segment is under pressure.

Without Wuling, GM’s Chinese achievements would stand in a better light. Shanghai GM sold 1.23 million cars in 2011, up 18.5 percent from a year earlier, an impressive feat, given the fact that the Chinese market “grew” by only 2.45 percent last year. However, without Wuling, GM China would be compared with Nissan. With Wuling being part of the total, GM China grew only by 8.3 percent in 2011.

Volkswagen’s performance in China is far better than the wulingfied GM China. Volkswagen’s Chinese sales grew 17.7 percent in 2011.

Both GM and Volkswagen are grabbing market share from other players. However, in the world’s largest car market, Volkswagen is grabbing market share twice as fast as GM. GM’s sales in China look high, but more than half of the volume comes from a low-cost, low-margin segment that is contracting.

]]> 10
GM China Copies Old Detroit Tactic: Sacrifice Profits For Volume Mon, 29 Aug 2011 11:50:23 +0000

GM China always had a comfortable lead over Volkswagen in China – at least on paper. More than half of GM China’s volume comes from small delivery vans, made by a three-way joint venture with SAIC and Wuling, in which GM held 34 percent. This share had been recently raised to 44 percent. The joint venture agreement allows GM to claim 100 percent of the small cars as theirs. “Whatever turns them on” (or Chinese word to that effect) say the other JV partners who happily count the cars again in their annual reports. There is one big problem with that. The “breadvan segment” (so called because the cars looks like loafs on wheels) has been shrinking and is ruining GM’s otherwise good Chinese numbers.  Now, GM can’t take it anymore, and is using a familiar tactic: “GM is sacrificing profit margins to maintain market share in China, cutting prices of low-cost minivans by as much as 15 percent to offset slowing sales in the world’s largest vehicle market,” Bloomberg reports.

“GM does not rely on the minibus for profit,” said Jenny Gu of J.D. Power China. “They only contribute volume.” At 15 percent off, the already razor-thin margin could evaporate. Now remember when we were young and swore we would stop when we need glasses? Same here.

“We made some short-term focused promotions to help the overall market situation,” Matthew Tsien, VP at SAIC-GM-Wuling, told Bloomberg. “We don’t expect it to be a long-term issue.”  Same here.

June ’11 June ’10 Change YTD Change
Shanghai GM 101,524 71,782 41.4% 600,002 25.00%
Chevrolet 51,312 38,304 34.0% 297,841 14.50%
Buick 54,140 36,486 48.4% 324,919 28.20%
Cadillac 2,722 1,812 50.2% 14,078 88.30%
Wuling 88,027 99,115 -11.2% 641,324 -5.40%
FAW-GM 4,327 5,220 -17.1% 30,332 -38.80%
All GM JV 193,878 176,486 9.9% 1,273,502 5.30%

The best-selling Wuling Sunshine minivan has been reduced to 28,000 yuan ($4,384) from 33,000 yuan earlier this year, according to GM.

Before the price reduction, SAIC-GM-Wuling made about 2,000 yuan ($313) on average for every minivan, says J.D. Power. GM’s 44 percent stake would translate to $138 per car.

In the meantime, Volkswagen is breathing down GM’s neck. GM sold 1.27 million vehicles in China in the first six months, 641,000 of those Wulings (see table.) Volkswagen sold 1.1 million cars in the same time in China, none of them cheap minivans.


]]> 7
GM China’s November Numbers, And A Deep Look In The Crystal Ball Thu, 02 Dec 2010 08:19:39 +0000

GM China, our recently no longer so reliable oracle for the Chinese market, raised its November sales by 11 percent, compared to an absolutely batty November 2009. 11 percent are not the same growth as the 109.5 percent GM China had recorded in last year’s November, but how much battier do you expect them to get? The more meaningful number is that for the first 11 months of 2010:  From January through November, GM’s China sales jumped 33 percent to a mind-blowing 2.17 million units. GM China will most likely close out the year in the 2.35 to 2.4m area – this is higher than the total sales of some of Europe’s larger countries, and definitely a whole lot more than GM sells back  home. Better get used to it.

In November, GM’s Chinese joint ventures moved 196,990 units. Not much change compared to the 199,641 units they sold last month. Back home, GM sold 168,670 units in a very good November.

GM’s passenger-car JV with SAIC, which keeps China supplied with Buicks and Chevrolets, brought in more impressive numbers. Sales are up 33 percent here, setting the stage for news of a very strong overall November market in the Middle Kingdom.

What rained on GM’s parade was Wuling. The econobox maker that helped inflate GM’s Chinese numbers by about a million a year continues to disappoint. Wuling reported only 84,879 mini vehicles in China for November, “without providing a comparison,” as Bloomberg complains.

Lazy, lazy Bloomberg. TTAC can provide the missing comparison. SAIC-GM-Wuling had sold 89,636 mini-vehicles in China in November 2009. We call that a 5 percent decrease. Woolly Wuling hasn’t kept up with the pace of the market lately. They deliver volume and bragging rights to GM, but no growth, and most likely very little profit. And they ruin the percentages everybody is so in love with.

Lazy journos will kvetch that (duh) 11 percent in November is less than 19.6 percent in October. Compared to what, gentlemen? Keep in mind that November 2009 was absolutely nutty in China.  Buick sales had risen 118 percent, Chevrolet sales had exploded by 281 percent. Honestly, I had expected overall Chinese sales to fall compared to that absolutely outrageous November 2009 sales orgy. That they did not fall and that they keep on climbing attests to the vigor of this still largely untapped market.

Did I say “largely untapped?” There are a paltry 63 cars per thousand people on China’s roads. In the U.S., there are 800 per thousand. The G7 average stands at around 600 per thousand. China passed Japan as the world’s second largest economy, with a still largely unmotorized population. They all want what we want: A car.

Looking ahead, growth in 2011 will most likely be more subdued in percentages, especially in the first quarter. The government will most likely do away with the tax incentives (who needs incentives  in that kind of a market?)  People lock them in in November and December. There will be pull-forward.

Still, market observers expect even more growth for 2011. J.D. Power thinks China’s auto market “will grow at a somewhat lower rate than in 2009 and 2010.” GM China’s Kevin Wale prognosticates growth of 10-15 percent more next year.  Don’t let those percentages fool you. 10 to 15 percent of 18 million will be 1.8 to 2.7 million more. Or the total sales of a good sized European country.

Bubble? There is none in sight. In the past ten years, China had years close to 5 percent growth and years close to 50 percent growth. On average, China’s car market grew 24 percent per year, and it still has only 63 cars per thousand.  Sure, there will be ups and downs, but the general direction of this market is due north. Like any other market, China will start slowing down when it reaches 500 cars per thousand, which I believe to happen some time after 2030. That needs around 750 million cars on the road, or about three times the U.S. number. Scary? Yes. Inevitable? Unless the sky falls, yes.

You think I’m crazy? You thought I was crazy when I started writing for TTAC two years ago, and I haven’t changed.

]]> 2
BaoJun: China’s Trojan Export Horse. By GM Tue, 23 Nov 2010 17:52:29 +0000

Yesterday, Ed introduced us to the latest addition to GM’s brand portfolio, the BaoJun. Introduced in China, it is allegedly slotted below the Chinese Chevrolet and the Chinese Buick, and supposedly, it is targeted at “first-time buyers in the nation’s second- and third-tier markets,” or so the propaganda goes. The car is made by the SAIC-GM-Wuling (SGMW) joint venture. We’ve had our eyes on that brand for a while, and eyed it with interested suspicion. The suspicion seems to be warranted.

China is brand crazed, but Chinese companies still need a little help in creating brands. (Quick: Name some Chinese brands with worldwide appeal? Thank you.) Why the joint venture would pick a new brand for China is a mystery. Doesn’t GM have a lot of used ones sitting around? I mean, even an Oldsmobile or a LaSalle would have more brand cachet in China than a “BaoJun.” (Which stands allegedly for “fine horse” – gee, why not Mustang? Sorry, wrong company.)

Now, information transpires that puts the undertaking into a more plausible light: According to Shanghai Securities News  (via Gasgoo) “unlike other homegrown car brands, the BaoJun was initially researched and developed for export. SGMW has already started export of its mini vehicles, and has taken its first step towards output of products, management team and operation model in India.” So BaoJun is actually part of the GM-SAIC-Wuling plan to take over India.

And that just the beginning. According to the paper, the SGMW JV is now considering to supply the car to other markets also, as CKD, or as whole production.

Other than many homegrown Chinese offerings, the car should pass muster abroad: “The compact sedan features a highly efficient GM powertrain that meets all local emission standards as well as the advanced Euro IV standard.” No news about crash tests, but with the help of GM engineers, it will survive those just as easily. We’ve said it a while ago: Deep in the BaoJun lurks a Buick Excelle.

Now why not export a Buick Excelle just like the Chevy Sail? Simple: A foreign car is licensed to the joint venture. With a homegrown car, even if it’s just homegrown on paper, the designs of the allegedly self-developed car are owned by the joint venture. When GM bought 10 percent of Wuling, a company that builds a million cars a year, and when GM paid only the nominal sum of  $51m, I had my suspicions that other payments must have been made. In the bargain, GM also agreed to provide technical services. Here appears to be a product of one of these technical services.

So everybody is freaking out about cheap Chinese exports flooding world markets and putting everybody out of business. It’s not happening. Until the Chinese receive help. From a company partially owned by the U.S. government and partially owned by the U.A.W. Isn’t life full of surprises?

]]> 24
GM Gets A Deal In China: 10% Of Wuling For $51m Fri, 12 Nov 2010 05:20:59 +0000

GM appears to be sick of the constant needling it receives about their Wuling joint venture in China. Here is a company that produces half of the 2 million cars GM proudly announced as theirs in China, and GM owns only 34 percent. (The 37 percent that had been bandied about apparently were also exaggerated.) 50.1 percent are owned by SAIC, the rest by Wuling. Contractually, GM is entitled to pull the wool over the heads of the world and OICA, and count the millions of diminutive Wulings as theirs. Now, GM is taking steps to redeem themselves. Or to redeem some of the IPO take. But just a little.

The Wall Street Journal says that GM plans to increase its stake in the Wuling joint venture to a breathtaking 44 percent. SAIC would remain in the driver’s seat and keep 50.1 percent. Wuling will hold the bag and 5.9 percent of the stock.

GM says this is “part of efforts to integrate the Chinese operation more into the global operation.” Well, after the production numbers had been integrated for years, it’s time to bring the rest more into the fold.

In an updated IPO prospectus, GM says it has entered into an agreement to purchase an additional 10 percent interest in SAIC GM Wuling Automobile Co. for $51 million in cash from a third joint-venture partner, Wuling Group. GM said it also agreed to provide technical services to Wuling Group through 2013. The transaction is subject to regulatory approval in China.

So GM got 10 percent of a company that builds more than a million cars a year for a pittance of $51m? That’s less than the MSRP of a Gulfstream V. There are still bargains to be had in China. And most likely some customary dealings under the table. Let’s see what those “technical services” will be.

GM needs more Wuling for two real reasons:

  • The cheap boxes are selling like hotcakes in China, especially in the rural areas. Although recently, their growth has been lagging the market.
  • GM needs them for its joint foray into India (together with SAIC).

According to the WSJ, “most of GM’s product offerings, from gas-guzzling big pickup trucks to subcompacts, are generally too pricey for buyers looking for low-cost, no-frills cars in emerging markets. Boxy Wuling microcars, priced around $4,000, are more suitable for India and other similar markets.”

GM’s future in international growth markets hinges on a company in Liuzhou (ever heard of it?) and a brand popular amongst poor farmers.

]]> 3
Whitacre: GM-SAIC Deal Was Henderson’s Idea Tue, 15 Dec 2009 17:57:48 +0000 No eye contact? (courtesy:detnews)

GM Chairman and CEO Ed Whitacre has made his first real media availability today, answering questions on a number of issues including the deal that sent control of GM’s most important Chinese joint venture to its partner, SAIC. According to Whitacre, the deal was put in place by former CEO Fritz Henderson. “It was sort of done before I got here,” Whitacre tells Reuters. Not to worry though, Whitacre has met with his counterpart at SAIC and was assured that “the nature of the partnership would not change.” Meanwhile, Gasgoo all but confirms that the rationale behind the deal is competition in India’s small-car sweepstakes, as a $3,500 sub-Spark model is apparently being planned to compliment the GM-SAIC-Wuling commercial vans that will spearhead the effort. Given how crowded India’s small car market is shaping up to be, it’s interesting that Whitacre didn’t cancel the agreement as he did with Henderson’s deal to sell Opel to Magna. And as for Henderson’s departure? “There was just a common agreement that what you want to do is not what I want to do,” says Whitacre.

]]> 5