Volkswagen Encroaches On GM In China
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.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
More by Bertel Schmitt
Comments
Join the conversation
The real profits come from Latin America. Mostly Brazil, but also Argentina and Uruguay. People there pay exorbitant amounts of money for cars that would be dirt cheap in the rest of the world, not just due to taxes but also due to massive profits. The Brazilian branches of all manufacturers pretty much never lose money.
I see a rather high number of Wuling Sunshines rebadged (sometimes not even rebadged) as Tiger Trucks on every Air Force base I've ever been to. At Lackland they were all Wulings, and on Keesler and Moody they were Tiger Trucks.