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To see the future for GM in China look at the SAIC-GM-Wuling joint venture

November 24, 2012

General Motors plans to export lots of vehicles from China, and some of them will be badged Chevrolet.  But the joint venture that produces those vehicles won’t be Shanghai GM, GM’s flagship venture in Shanghai with SAIC.  The vehicles will be produced by SAIC-GM-Wuling Automobile Co, GM’s venture with Wuling Motors and SAIC .  A lot of exciting stuff is happening at SGMW these days, and the JV is worth keeping a close eye on.

Few casual observers of the Chinese auto market realize how crucial SGMW has been to GM’s sales growth in China.  Of the 2.33 million vehicles GM sold in China in the first ten months of this year, 51% were produced at SGMW. A lot of those vehicles didn’t have a GM-brand badge on them, though the venture is producing Chevrolet models.  They were badged Wuling and Baojun.

I have long kept my eye on SGMW.  But I realized just how much importance GM was placing on this venture in October when GM announced that Ray Bierzynski, one of its most able and China-savvy executives, had been appointed executive vice president of the venture.   I’ve known Ray since the mid-2000’s when he assumed the leading role at PATAC, the GM-SAIC design and engineering joint venture in Shanghai. More recently he served as executive director of electrification strategy for GM China.  Why would a man with Ray’s background be sent to Wuling, I mulled?   Now I think it is because SGMW is set to become a big export base for GM in China and GM wanted to send a very capable guy to oversee that expansion.

Among other recent SGMW news:  In August, GM announced the Lechi mini car built on the Daewoo Matiz platform (can you say Chevrolet Spark?) was being rebadged Baojun.  Baojun is SGMW’s own brand; it targets buyers in China’s second- and third-tier cities.  The Lechi minicar is also “GM’s new global strategic product,” according to SGMW website.  (It was previously being produced at SGMW but badged a Chevy).

The Chevy Spark became an SGMW model, re-badged Baojun and re-named the Lechi. It is a global model for GM, but initially aimed at China’s smaller cities.

In mid-November, SGMW opened a new 400,000 unit passenger car production base “initially” producing Baojun brand cars.  It is also building an engine plant with annual capacity of 400,000 due to begin operating in September 2013.   Adds the press release announcing the new plant:  “SGMW also plans to enhance its R&D capability …. Integrating engineering design and testing resources, and establishing a systematic capability for product development and technical research.  The aim is to fully support the overall development strategy of SGMW by helping it achieve 2 million annual vehicle sales goal (and) grow its export business.”

SGMW is counting on exports – badged Wuling and Chevy and Baojun — to help reach that 2 million unit sales goal.  GM China spokesperson Dayna Hart wrote in a November 20 email to me that in 2012 SGMW has exported 12,773 units year-to-date.  The list of countries SGMW exports to – and its exports in general– is growing.   SGMW models badged Chevrolet are exported to 15 markets through GM’s Chevrolet distribution channels.  “Our export models fill a gap in the existing Chevrolet portfolio in other market,” she wrote in the email.  Yeah, a gap for inexpensive minivans and trucks!  Those Chevy-badged exports are Wuling products.

As for Wuling-badged models, they are exported to some 40 countries overall, says the SGMW website.

The exported models are segment leaders in Chile, Ecuador, and Colombia, said Hart, and are in the top six in their segment in other markets such as Egypt.  As you may have figured out, the SGMW-produced cars are mainly exported to developing countries.   But the U.S., Japan, Germany, and the U.K. are also among the 19 country sites on the SGMW site.  So at least a few of the exports are also going to developed countries, it seems.   SGMW has even exported at least several hundred minitrucks or vans to the U.S.

Most of those exports were minivans and minitrucks.  But you can bet GM aims to export growing numbers of mini cars and even compact sedans such as the Baojun 630, a model based on the same platform as the Buick Excelle platform. I mean exports to all destinations, not just the U.S…..

A bit about Liuzhou Wuling and the SGMW joint venture.   Launched in November of 2002, SGMW was formed with investment from GM, SAIC, and Liuzhou Wuling Motors Co. Ltd.  Wuling was as China’s largest maker (and seller) of minivans – known in China as mianbao che, or “bread box cars.”  At the time it was formed GM had only a 34% stake in the joint venture.  SAIC had 50.1% and Wuling 15.9%.  In late 2010, however, GM boosted its share to 44%, leaving Wuling with 5.9%.    SGMW produces China’s best-selling minivan, the Wuling Sunshine.  In 2011, it sold 731,749 Sunshine minivans down3%.  In the first ten months of 2012, SGMW sold 442,593 Sunshine units, down 27%.  Minivan sales were boosted artificially in 2011 by a government rebate program.

Liuzhou Wuling was China’s largest minivan manufacturer before the joint venture formation, but it transferred most of that business to the joint venture.  The state-owned Chinese company seems to have merged in 2007 with Dragon Hill Holdings Ltd.  and transformed into  Liuzhou Wuling Automobile Industry Co. Ltd. The new entity produces electric vans, trucks, and pickups (some of which are exported to the U.S. and sold through EcoCentre dealerships.  See my earlier blog on that topic).  It also produces components including brakes, axles, pressing and jointing parts, instrument panels, seats, and door winder assemblies.  SGMW is among its customers.  And, it produces gasoline engines.

Given that Ray Bierzynski just came off an assignment as director of electrification strategy for GM China, I’ll be interested to see if SGMW now starts producing electric vehicles, too.  But I’ll be more interested to keep following SGMW’s development overall.  I predict big things for the venture in the not-too-distant future.

Ray Bierzynski left his position as executive director of electrification strategy at GM China to become EVP of its joint venture with SAIC and Wuling.

I visited Liuzhou Wuling in the south China province of Guangxi in 2001 before it had officially become GM’s partner.  At the time I interviewed Wuling president Shen Yang and toured the Wuling production line.  Shen at that time wore fairly tacky Chinese suits, had bad teeth, and wore transparent Chinese socks.  The plant was already transforming.  Though the building exterior was old and the machinery inside somewhat out-of-date, the manufacturing process was already changing over to GM’s system.  Red lines delineated where visitors could walk, signs noted how many injury-free days the plant had recorded.  I’m sure there were many other changes I couldn’t see.

I ran into Shen Yang, who is now president of the JV, at the Shanghai Auto Show five or six years ago.  He was wearing a very nice suit; I’m guessing his socks weren’t see-through and his teeth were perfect.  In Liuzhou, Wuling has built a new plant and is adding another.  I’ll have to visit again to see the changes for myself.

2 Comments leave one →
  1. Allen permalink
    November 24, 2012 3:30 am

    What is SAIC’s role in this? What other touch points do they have in the automotive industry? I was surprised to see them as a major equity owner player in something like this, but that is probably due to my having an imperfect perception of them.

    • November 24, 2012 3:32 am

      Well, Shanghai Automotive Industry Corp is the largest automaker in China! It partners with GM and Volkswagen. Forgot to embed the SAIC link. Will try to do that now!

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