GM's China Sales Fall

BEIJING -- General Motors Corp.'s flagship passenger-vehicle venture in China posted its first decline in sales in 2008, marking a lackluster year for the U.S. auto maker's local operations as overall sales growth slowed sharply.

But the auto-industry picture in China wasn't uniformly bleak, as December sales for some of GM's competitors, particularly Japanese car makers, indicated an improvement after a prolonged slump.

Sales at GM's passenger-vehicle joint venture, Shanghai General Motors Corp., fell 7% to 445,709 units from 479,427 units in 2007. Shanghai General Motors is GM's 50-50 joint venture with SAIC Motor Corp.

"A series of natural disasters and an increase in fuel prices earlier in the year exacerbated the impact of the global economic downturn in China," Kevin Wale, president and managing director of GM in China, said in a statement.

GM's total vehicle sales in China, including commercial vehicles and imports, rose 6.1% to 1,094,561 units, a record. However, growth decelerated sharply from 19% in 2007 and 32% in 2006 because of a weakening local auto industry and GM's aging models, analysts said.

The U.S. auto maker's overall sales increase was driven by its commercial-vehicle joint venture. Sales at that venture -- SAIC-GM-Wuling Automobile Co. -- rose 18% last year to 647,296 units from 548,945 units the year before. But GM owns only 34% of the venture and the margins on its minitruck and minibus products are relatively low. SAIC Motor Corp. owns 50% of the venture, and Wuling Automobile Co. owns 16%.

China's auto market weakened in 2008 following years of robust double-digit growth. Vehicle-sales growth slipped to 8.52% in the January-November period, when 8.63 million vehicles were sold in China, according to the China Association of Automobile Manufacturers. Vehicle sales declined in August, the first fall in more than three years.

December and full-year sales figures for the industry weren't yet available, but there were some indications of a rebound during the month. Japan's Mazda Motor Corp. capped 2008 with record sales in China for one of the company's top selling models. According to a senior company executive, Mazda sold about 7,000 Mazda6 midsize cars in China last month, an all-time high since the company began selling the model in 2003. For all of 2008, the company sold a total of about 67,000 Mazda6 cars, accounting for nearly half of the company's overall sales in China.

"Mazda did well in December, and sales so far this month are fairly brisk," said the executive.

People familiar with the matter at Honda Motor Co. and Toyota Motor Corp. said they also had fairly good sales in December, without elaborating.

Mazda's spokesman in Beijing, Akira Shigemasa, said the company isn't ready to disclose its sales figures for December or for the year but confirmed that December was a relatively good sales month, especially given the slowdown since August.

Banking on the Mazda6's popularity, the executive said Mazda has decided to continue to sell the current generation of the Mazda6 even after it launches the redesigned version later this year. The decision defies the industry's normal practice, but in China, more companies, including Toyota, have taken a similar approach.

Mazda's sales target for this year wasn't available. The spokesman said Mazda plans to monitor China's auto sales this month and announce its sales projection later in the first quarter.

"It's still too difficult to read where the market is going," he said.

CSM Worldwide analyst Yale Zhang said key GM models, such as the Buick LaCrosse and Excelle sedans, have reached the end of their product cycles. "You will see a recovery in 2009" with the introduction of new models, he said.

Mr. Wale said in the statement that GM will introduce several new models in China. "Over the next two to three years, we will roll out five or more new products under both of our volume brands, Buick and Chevrolet," he said. GM's four other brands in China -- Cadillac, Opel, Saab and Wuling -- will also introduce new and upgraded models, he said.

IHS Global Insight analyst John Zeng said the company was also hurt after GM executives lobbied the U.S. government for emergency loans to fend off bankruptcy late last year. "GM and Ford have this challenge, to defend themselves in China and improve consumer confidence," he said.

GM has said its China operations are separate and unaffected by liquidity problems in the U.S. It opened a new passenger-vehicle plant with SAIC in mid-December with an annual production capacity of 150,000 units. "While we expect vehicle sales in China to remain steady in 2009, we anticipate China remaining the world's fastest-growing major market over the next decade," Mr. Wale said.


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