By on January 13, 2012

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.

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10 Comments on “Volkswagen Encroaches On GM In China...”

  • avatar

    Wow, certainly inventive. How about all those companies that don`t really have a major presence in China like Ford. Or those that grew with or below the market (2.45%). I would think they have a bigger problem than GM or VW.

    The higher margin GM cars grew 18.5 which is on par with VW albeit with a smaller volume. That is pretty impressive in a 2.45% market.

  • avatar

    I too would prefer German cars to American

    • 0 avatar

      Owning a 2001 Volkswagen Jetta gave me respect for the “reliability” maintainability of my old 1998 Ranger. And that’s saying something!

      • 0 avatar

        In other words, I’ll take American over German any day.

        My Jetta was lots of fun to drive, but it was as reliable as my father’s 1978 Volkswagen minibus.

        My used Fords are at least of average reliability and above-average repairability. Used Toyota wins, though, as my wife’s super-reliable 2004 Prius has shown over the last 8 years.

    • 0 avatar

      If you have seen the Volkswagens they sell in in China, you might change your mind..

  • avatar

    “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.”

    So are VW’s core offerings in China, mostly cheap stuff.

    Toyota <8M units, company worth $107B
    VW 8~9M units, worth $67B
    GM 9M+ units, worth $38B

    The Wuling sales certainly didn't help much as how people betting their own money view GM.

  • avatar

    Don’t discount the upcoming A4 v ATS battle. Everyone is focusing on the ATS v the 3 series in the U.S., but that isn’t why GM built the ATS.

  • avatar

    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.

  • avatar

    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.

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