shanghai general motors
HKU395
ZHIGANG TAO
SHANGHAI GENERAL MOTORS: THE RISE OF A
LATE-COMER
In February 1998, the Asian Wall Street Journal, sceptical at General Motor’s (GM) investment in China, ran a front-page story with the headline, “GM bets big on a market littered with casualties.”1 Seven years later, in January 2005, GM featured once again in the same paper, only this time, the headline was more positive “GM vehicle sales in China rose
27% in 2004”.2 While Shanghai Volkswagen (SVW) maintained its leadership position with about 25% of China’s automobile market in 2004, Shanghai General Motors (SGM), GM’s flagship joint venture (JV) with Shanghai Automotive Industry Corporation (SAIC), was closing the gap with sales increased by 26% year-on-year to 252,896 units. SGM said that its market share in China rose to around 10% in 2004, compared with 8.5% in 2001.3 However, in 2004, SGM’s growth rate slowed down drastically, compared with the 46% rise in 2003.
This was largely on account of the tougher consumer credit requirements, higher interest rates and a market characterized by price wars.
Jack Smith, GM’s Chairman and CEO, made a promise in 1994 that the company would bring its best technologies to China, and help the country to build one of the strongest and most advanced automobile industries in the world. Given GM’s vast investment and willingness to engage in technological transfer in China, some analysts commented that GM was too hungry, and gave up too much to win the deal with SAIC. Regardless of the criticism, GM was determined that its venture in China was long-term, and was willing to invest in the development of China’s automobile market. Eight years into its partnership with SAIC, GM was still very optimistic. In mid-2004, it announced plans to double production capacity by
2007, and to relocate its Asia-Pacific headquarters from Singapore to Shanghai. 4 What factors contributed to SGM’s strong growth? What synergies existed in the GM-SAIC
ZHIGANG TAO
SHANGHAI GENERAL MOTORS: THE RISE OF A
LATE-COMER
In February 1998, the Asian Wall Street Journal, sceptical at General Motor’s (GM) investment in China, ran a front-page story with the headline, “GM bets big on a market littered with casualties.”1 Seven years later, in January 2005, GM featured once again in the same paper, only this time, the headline was more positive “GM vehicle sales in China rose
27% in 2004”.2 While Shanghai Volkswagen (SVW) maintained its leadership position with about 25% of China’s automobile market in 2004, Shanghai General Motors (SGM), GM’s flagship joint venture (JV) with Shanghai Automotive Industry Corporation (SAIC), was closing the gap with sales increased by 26% year-on-year to 252,896 units. SGM said that its market share in China rose to around 10% in 2004, compared with 8.5% in 2001.3 However, in 2004, SGM’s growth rate slowed down drastically, compared with the 46% rise in 2003.
This was largely on account of the tougher consumer credit requirements, higher interest rates and a market characterized by price wars.
Jack Smith, GM’s Chairman and CEO, made a promise in 1994 that the company would bring its best technologies to China, and help the country to build one of the strongest and most advanced automobile industries in the world. Given GM’s vast investment and willingness to engage in technological transfer in China, some analysts commented that GM was too hungry, and gave up too much to win the deal with SAIC. Regardless of the criticism, GM was determined that its venture in China was long-term, and was willing to invest in the development of China’s automobile market. Eight years into its partnership with SAIC, GM was still very optimistic. In mid-2004, it announced plans to double production capacity by
2007, and to relocate its Asia-Pacific headquarters from Singapore to Shanghai. 4 What factors contributed to SGM’s strong growth? What synergies existed in the GM-SAIC