GM preps Wuling to be China’s cheap exec van production base; export also part of plan

I was in Shanghai Dec 6-17 and as usual met with many friends and gossiped a lot.  One topic of discussion was GM’s plans for SGMW, its joint venture with SAIC and Wuling Auto.  www.sgmw.com.cn  The JV produces minivans under the Wuling badge and passenger cars under the Baojun badge.  It exports to more than 40 countries, and many of the exports are badged Chevrolet.

I have always been interested in Wuling, but my interest increased a few months ago when Ray Bierzynski, GM China’s executive director of electrification strategy, was transferred to Liuzhou to become an EVP at SGMW.  http://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/cn/en/2012/Oct/1012_Bierzynski.html   What was GM up to?  At the time I speculated that GM wanted to boost SGMW’s importance as an export base.  I still believe that.  I think GM sees SGMW as its growth engine going forward in China, as well.  China’s inland cities are where the growth opportunities are now for automakers.  SGMW produces a model that is perfect for aspiring middle-class families in China’s interior – the Hong Guang minivan.  Nah, say not that it is a minivan.  When SGMW launched it in September of 2010, it was labeled “China’s first compact business vehicle.”  Said Kevin Wale, then president of GM China Group (since retired): “The Hong Guang addresses the growing need for a small, economical vehicle for business use and family travel.”  https://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2010/Sept/0914_wuling.html  Translation:  It is the poor man’s GL8! Okay, not poor man’s.  The less wealthy man’s GL8.  The GL8 is GM’s wildly successful MPV.  The GL8 First Land model – the lower end – starts at 228,000 RMB (US $36,580).   GM China sold 58,566 GL8s in China in Jan-Oct according to LMC Automotive.

The Hong Guang  has seven models priced between 44,800 RMB and 60,800 RMB.  Quite a price difference from the GL8, but income levels are lower in China’s inland areas.  And not bad for a rear-wheel drive seven-seater with power windows and locks, airco, radio with an MP3 port, and a CD player, among other amenities.   And here’s a news flash–remember you read it here first.  SGMW will produce a front-wheel drive version of the Hong Guang. Currently it is only offered in RWD.  And, they may start badging it Baojun rather than Wuling.  Makes sense.  The Wuling name stands for workhorse small commercial vans.  SGMW is marketing the Hong Guang as a sophisticated business car that can double as a family van on weekends.

SGMW sold 258,678 Hong Guangs in January through October of 2012, according to LMC Automotive.  No comparison figure was available.   Wuling’s aging Sunshine minivan is still SGMW’s best-selling model at 442,593 units sold in January through October of 2012.  But that was down 27% on-year.  The king is dead, long live the new king!

SGMW isn’t giving up on the Sunshine.  It will continue to sell well — albeit at a declining rate — for many years.  So SGMW is building a new plant in the inland China city of Chongqing. Sources tell me Sunshine production will be transferred there. http://www.reuters.com/article/2012/11/28/us-gm-china-idUSBRE8AR0LV20121128  The plant, which will begin producing minivans in 2015, will have a 400,000 unit capacity and also produce 400,000 engines annually.  A side note:  Chongqing is home to Changan, another large minivan producer.  A source tells me that the Chongqing government asked SGMW, “Why are you doing this?”  when the new plant was announced.  SGMW said it considered Chongqing and Chengdu as locations, but decided Chongqing was superior.  I’ll bet it is.  It has a ready supplier base, courtesy of Changan and joint venture partner Ford as well as good logistics, courtesy of Ford and Changan.  Hey, nobody said business was friendly.

Meanwhile, back in Liuzhou, where SGMW is located, capacity has been cleared to produce lots of Hong Guang compact business vehicles.  Indeed, space being used to produce the Baojun passenger cars is available now,  Also in November, SGMW opened a new 400,000-unit plant in Liuzhou to produce passenger cars. http://media.gm.com/content/media/cn/en/gm/news.detail.html/content/Pages/news/cn/en/2012/Nov/1118_Wuling.html

As for the Hong Guang, SGMW is already exporting the vehicle to multiple countries, including India, where it is assembled from a kit and badged a Chevrolet.  . But trouble is brewing in India between GM and SAIC.  In October SAIC divested itself of shares in the GM-SAIC joint venture in India, reducing its stake to 7% from 50%.   The China Daily said SAIC did so after the JV failed to make a profit but sources tell me SAIC wants to market its own brand cars in India.  http://www.chinadaily.com.cn/cndy/2012-10/29/content_15852533.htm

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. Will part of his new job be chief diplomat?

Which brings me back to speculation about why Bierzynski was moved to SGMW.  He has years of experience working with SAIC – he was head of PATAC, GM and SAIC’s 50-50 research and engineering venture, after all.  Seems his diplomatic skills may be needed to preserve the partnership as SGMW boosts it exports.  He may need a strong liver, though.  Those talks may involve some long nights over bai jiu.