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General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
General Motors in China
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General Motors in China

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Will GM Be "Reborn" as an Asian-Centric Growth Company? …

Will GM Be "Reborn" as an Asian-Centric Growth Company?

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  • 1. June, 2011 BeijingGeneral Motors in ChinaWill GM be “Reborn” as an Asian-Centric Growth Company?Bill RussoJune 21, 2011 1
  • 2. Over the past decade, China & India have emerged as the world’slargest and fastest-growing automotive markets Size and Growth of Global Passenger Vehicle* Market (Major Countries) CAGR 40% 2001-2009, % 35% China 30% 25% Argentina 20% Iran Turkey India 15% Saudi Arabia 10% Indonesia Brazil Thailand Russia Germany 5% France Korea Global Average :1.6% 0% Spain UK Italy Japan -5% US -10% 0 1 2 3 4 5 6 7 8 9 10 11 2009 Market Size (Million Units) Bubble size:Note: * includes segment of A, B, C, D, E, F, MPV SUV 2009 market sizeSource: Global Insight 2010; Booz & Company analysis 2
  • 3. For the Global Auto market, Asia pacific represents the greatestopportunity for growth… Eastern Europe Western Europe Growth thru 2020: 2,835K NAFTA Growth thru 2020: 1,527K CAGR (2010-2020): 6% Asia Pacific Growth thru 2020: 5,528K CAGR (2010-2020):1% Growth thru 2020: 12,626K CAGR (2010-2020):4% CAGR (2010-2020): 5% Africa/Middle East Growth thru 2020:1,264K = Area Reflects Size Of 2009 Actual PV Sales Latin America CAGR (2010-2020):4% Growth thru 2020: 2,899K = Area Reflects Size Of 2020 Forecasted PV Sales CAGR (2010-2020): 6% 000 Units Market 2010 PV 2015 PV 2020 PV Asia Pacific 22,212 30,350 34,838 NAFTA 11,545 16,877 17,073 Western Europe 12,776 14,133 14,302 Eastern Europe 3,261 5,035 6,095 Latin America 4,030 5,570 6,929 Africa/Middle East 2,946 3,783 4,211Source: Global Insight Data 3
  • 4. …Within Asia pacific, the greatest growth opportunity is China China: Growth thru 2020: 8,653K CAGR (2010-2020): 6% Japan: = Area Reflects Size Of 2009 Actual PV Sales Japan Mongolia Growth thru 2020: -457K North Korea CAGR (2010-2020): -1% = Area Reflects Size Of 2020 Forecasted PV Sales China South Korea India Pakistan Nepal South Korea: Bhutan Bangladesh Myanmar Taiwan Growth thru 2020: 110K Laos CAGR (2010-2020): 1% 000 Units Vietnam Taiwan: Cambodia Market 2010 PV 2015 PV 2020 PV Growth thru 2020: 79K India: Philippines Thailand CAGR (2010-2020): 2% China 11,462 17,296 20,115 Growth thru 2020: 2,621K CAGR (2010-2020): 8% Malaysia Japan 4,254 4,075 3,797 ASEAN: Growth thru 2020: 1,074K India 2,240 3,700 4,862 CAGR (2010-2020): 5% Indonesia ASEAN* 1,634 2,185 2,709 South Korea 1,302 1,407 1,412 Australia 807 1,020 1,117 Australia Australia: Taiwan 299 337 378 Growth thru 2020: 310K CAGR (2010-2020): 3% New Zealand 63 82 87 New Zealand Rest of Asia Pacific 152 247 328 Total 22,212 30,350 34,838Note: ASEAN figures include top 5 ASEAN member countries, including Thailand, Malaysia, Indonesia, Singapore, and Philippines Rest of Asia-Pacific includes Hong Kong and PakistanSource: Global Insight Data 4
  • 5. Local Chinese brands are growing market share significantly,but international OEMs still dominate INTERNATIONAL/ LOCAL OEM CHINA PV MARKET SHARE International OEMs/Brands International OEMs/Brands Top 8 Domestic OEMs Local OEMs/Brands VW 17.76% 3.87% 16.77% Chery 4.47% TOYOTA 10.31% China PV sales 2008-2010 7.14% (incl. import, million units) 5.67% GM1 8.80% FAW 9.68% 5.04% 8.47% 11.5 Hyundai 9.29% 3.34% Geely 8.29% 3.69% Honda 5.66% International 6.46% 69% 2.86% Nissan 5.99% BYD 5.7 4.65% FORD 2.74% 2.58% 1.67% 75% Brilliance PSA 3.18% 1.66% 3.19% 31% Local 3.14% 25% 1.08% Suzuki 2.28% Greatwall 2.16% 0.53% 2008 2010 MMC 0.47% 1.54% 1.14% Chang’an2 BMW 1.39% 1.92% 2008 20101) Excluding CV volumes from SAIC-GM-Wuling2) Including AVICSource: Global Insight China Report 5
  • 6. GM has made significant investment in China covering fromR&D, core parts supply to vehicle manufacturing GM China Footprint China Shareholding Co. Shanghai GM (PV Plant#3) Powertrain Manufacturing Shanghai GM PV Plant#2 Vehicle Manufacturing SGM ( Shenyang ) Beisheng Motor Co. Launch: August 2004 SGM Dongyue Vehicle Manufacturing Plant Financial Services Equity: SAIC 25%, GM China 25%, SGM 50% Equity: SAIC 25%: SGM* 50%:GM China 25% R&D center Products: GL8 Launch: June 1997 Capacity: 200,000 units Products: Chevrolet Lova, Sail, Epica Parts Manufacturing, Warehousing, Distribution Capacity: Current 120,000/Y, 2012capacity 480,000Pan Asia Technical Automotive Center Shanghai GM Engine Plant#2(PATAC) Shenyang SGM Dongyue Auto Powertrain Co. Ltd. Equity: SGM50%: SAIC25%:GM China 25%GM-Shanghai Jiao Tong University SOP: June, 2004 Product: Engine, Gearbox, Stamping, Block castingTechnology Institute Yiantai Equity: GM 50%, DFAG 50%,$25M ShanghaiHondaWuling Motor Co. GMAC-SAIC Automotive Finance Co. Ltd. Launch: June 2002 Qingdao Launch: Aug. 2004 Equity: SAIC 25%, GM China 34%, Wuling 16%, SGM 25% Equity: GMAC 50%: SAICFC 50% 1.GM Warehousing and Trading Shanghai Capacity: Current 800,000 unit, up to 1.3million in 2012 (Shanghai) Co. Ltd. Shanghai GM PV Plant#1 Product: Wuling, Micro-van, Small van & pickup, 2. ACDelco SGM Jinqiao Vehicle Manufacturing Plant Chevrolet Spark Equity: SAIC 50%: GM 50% GM (China) Investment Co Launch: June 1997 Products: Excelle, LaCrosse, Cardillac STS SAIC GM Wuling’s Engine Plant Capacity: 320,000 units Shanghai GM Engine Plant#1SOP: July, 2007Capacity: 300,000 units SGM Jinqiao Engine Plant SOP: October, 1998Products: 1.1L/1.2L to supply Wuling Hongtu Equity: SAIC 50%, GM 50%micro truck and later Spark Liuzhou Allisan TransmissionSource: Literature research; Synergistics Limited analysis SOP: May 2005 Product: Upgrading services for CV auto transmission 6
  • 7. GM Showroom Lineup Local BUX BUX BUX BUXProducer AVEO/ Park Model Spark/Sail Cruze LOVA Epica Captiva Excelle Yinglang Regal LaCrosse GL8 Avenue CTS SLS SRX Escalade XLR Brand Exterior 1.0L/1.2/ 1.6/2.0/Engine (L) 1.6/1.8L 1.2/1.4L 1.8L 1.6L/1.8L 2.4/3.2L 1.6L/1.8L 2.4L/3.0L 2.4/2.5L/ 3.0L 3.0L 3.0L/3.6L 2.8L/3.6L /4.6L 3.0L 6.2L 4.6L 1.4 2.4 698 600 1360 1520 588 578 429 500 498 400 378 389Price Range 369 322(000RMB) 300 329 276 269 222 218 225 179 200 159 169 157 204 98 100 56 76 114 108 108 High Volume Zone 138 39 57 72 Compact Std. Mid-size Full-Szie Lux.LARGE Lux.SPECIA Segment Micro Car Compact Car Small Car Std. mid-size Compact SUV Compact Std. full-size Full-size MPV Std. Large Lux. Full-size Lux. Full-size SUV SUV LITY CARSales Launch 09/2005 03/2007 Date 12/2003 2002 11/2007 08/2003 01/2010 XT 04/2003 03/2006 2002 04/2007 - 11/2006 - 01/2008 08/2005 03/2006 Refresh 07/2010 GT 11,000 2010 Sales 32,000 20,000 42,000 N.A 197,000 15,000 71,000 43,000 5,700 1,600 4,400 116 - - 85,000Note: Not include Buick Enclave, SAAB, Opel, Pontiac, Saturn, Hummer, GMC CKD BUXbrandsSource: Sales from 2007 CAAM report, Price from Cheshi.com
  • 8. 1 Integration of Asia business operations into the global value chainGM - China is replacing the US as the most important market andoperation base GM’s Development Stages in China Results of GM’s One World Strategy R&D Market for Manufactur Centers for Global Imported ing Local and Hub for Sales §  China as the #1 country for Products Base Global and R&D GM in terms of: Markets –  Sales (2.35 million units in 2010, surpassed US) §  1920s: First sales §  1997: First JV with §  2007: First wholly- §  2009: International –  Growth (10-year CAGR office in China SAIC to import, owned R&D operation 50%) produce, and sell facility - product headquarters - GMIO customization and (all business outside §  Leader in China s auto global product US and Europe) market, 13% share (2010) §  1998: First design moved to Shanghai §  China as sourcing hub production facility started operation §  Over 50% of all GM §  2010: Global GM vehicles are now sold in Advance Technology international markets §  To date: 8 Center manufacturing §  Planned to start exporting facilities to US in 2011 §  2012: Launch Shanghai GM Wuling platform based van and small cars in IndiaSource: Booz & Company analysis 8
  • 9. Across the development path for R&D and productiondevelopment capability… PRELIMINARY R&D and Product Development Capability Development - China Automotive Industry Stage - I (1970s-80s) Stage - II (1980s - 90s) Stage - III (1990s - Current) Stage - IV (2015 & beyond) Localization: 40% Localization: ~70% Localization: ~100% Go Global §  SKD or CKD kits shipped §  Localization of products to §  Increased activities in §  Global OEMs start setting- to China, assembled with suit the China market setting-up of R&D centers up 100% owned R&D the help of JV partners needs with joint - ownership of centers in China to and sold in the market. JV partners in China develop global products (close to manufacturing §  Sparse development of JV facilities or key markets §  Limited engineering, R&D centers §  Achieve concept - launch supply chain and sourcing capabilities for products capabilities prevented §  Engineering and product targeted for China with global OEMs to take any development for products almost 100% content risks with performing PD targeted for Chinese sourced locally in China market is performed within the R&D centerSource: Literature research; Booz & Company analysis 9
  • 10. …GM is a clear leader in China PRELIMINARY R&D and Product Development Capability - Global OEMs in China Stage - I Stage - II Stage - III Stage - IV Localization: 40% Localization: ~70% Localization: ~100% Complete PD Capability •  IP rights, Technology GM: Developed GL8 for the China market with 100% protection, etc. are some localized content. PD and of the concerns that Continuing to increase the engineering changes led by prevented rapid Focused on meeting local content as supply chain PATAC minimum local content develops in China. R&D investments in requirements to preserve plans are unclear at this development of R&D / quality, engineering and point. PD capabilities in brand differentiation. China. Product development and launch of VW Lavida done in China for the domestic Hyundai: Almost 100% localmarket content for Elantra. Highly Audi: Reached ~70%-80% established relation-ships localization content (by with local supply base and value), designed products JV ventures for domestic to meet China market ER&D and PD activities Followers LeadersSource: Literature research; Booz & Company analysis 10
  • 11. They adopted more advanced R&D center models in China… R&D Center Models Adopted By Various OEMs - Product Development R&D Center in R&D Center in the Region JV R&D Center R&D Center in Mature Market (outside Home country & in China China (Europe or USA China) §  OEMs do not have China- §  R&D facility in Asia region §  OEMs developed strong §  OEMs setting-up 100% specific R&D center and supports PD of vehicles JV R&D centers with the owned R&D center in products are developed in for the entire region - help of their JV partners China the global R&D center or including China §  No restrictions to develop §  R&D center plays an HQ §  Localization is performed R&D capabilities of the JV active role in §  Typically, customer in China with help of facility - with development development of vehicles preferences are rolled-up strong sourcing / of PD capabilities to targeted for China to global R&D center and purchasing presence in support local products §  China R&D center is part any product modifications China. of global / regional are made only if released product development, globally (across all product / platform products) strategies The path seems reflective of their sales success in ChinaSource: Literature research; Booz & Company analysis 11
  • 12. 2 Leveraging horizontal capabilities resident in Asia to expand market participationResulting in products adapted to the local market requirements CASE STUDY Examples: GM’s development of products geared towards China Buick Park Avenue Buick New Lacrosse Buick Excelle §  In China, it is a strong luxury RWD competitor §  In China, instrument panel, center §  In China, the Buick Excelle GT will be with longer wheelbase of 3009mm, to replace console and door trim panels offered with the choice of either a 1.8- Buick Royaum (WB 2939mm) with additional interpenetrate with each other liter naturally-aspirated engine that rear passenger luxury content §  In China, the backseat was churns out 145 horsepower or a more designed in fastback streamline potent 1.6-liter turbocharged four- shape cylinder mill pumping out 181 hp §  The Excelle GT is built on the same platform that underpins the Chevrolet Cruze, Opel Astra and two-door Excelle XT Longer Wheel Base Upgraded Interiors and additional Rear Seat LegroomSource: Literature research; Synergistics Limited analysis 12
  • 13. 2 Leveraging horizontal capabilities resident in Asia to expand market participationGM is a successful example of gaining competitive advantage bycooperation with local players GM’s Sales in China Expansions of GM s Corporate Operations (2005-2010, in Million Units) in China §  Recently, GM announced a plan to set up Shanghai 1.83 2.35 GMIO headquarters, managing the unified management +29% of all overseas business, which indicates the central role 1.54 China plays in GMs global strategy §  GM and SAIC also announced to set up a GM-SAIC 1.04 Motor Investment Co. in Hong Kong with a $1 billion 0.88 investment split equally between the two for use in 0.66 purchasing 100 percent shares of General Motors India –  GM-SAIC India is expected to make small cars and commercial vehicles in India §  GM s mini-vehicle China JV (SAIC- 2005 2006 2007 2008 2009 2010 GM-Wuling) will introduce the first own-brand car (Baojun, meaning §  GM aims to sell 3 million vehicles a year there by 2015 treasured horse) to target the fast- as it adds new, more fuel-efficient models to meet demand growing low end market; The car §  “ China GM’s largest single market worldwide and GM will model is Based on Buick Excelle and launch 25 new models in China in 2010 and 2011 in a bid is aiming to combine world-class to maintain its leading position” - Gan Wenwei, President quality with low ownership costs and General Manager of GMSource: Automotive News; Company profile; Booz & Company analysis 13
  • 14. 2 Leveraging horizontal capabilities resident in Asia to expand market participationJV partnership and acquisition provide solutions for GM to gainaccess to China market, and to strengthen its presence in India GM’s Partnership with SAIC Implications to GM’s Expansion into India India §  SAIC and GM formed 50:50 R&D JV in August 2010 to: §  YTD Oct. 2010, GM’s sales in India grows up almost –  Jointly develop fuel-efficient engines and 79% and will surpass 100,000 year end transmission §  Nov. 12, 2010, GM formally inaugurated the flexi- –  Deliver new power-train systems within 3 years engine plant in Talegoan, Pune. The plant will take §  Products include small engine and front-wheel-drive total Talegoan output to 300,000 cars and 300,000 transmission that are 10% more fuel-efficient and reduce engines annually. emissions by 20% §  The automaker has developed local suppliers and §  A Chinese automaker and a foreign partner share awarded component supply contracts worth intellectual property rights on a core technology for the $500million. It plans to source components worth first time $1bn in the next two years for its global operations. §  Nov.,2010, SAIC announced to acquire 1% GM share through investment of $500M during GM’s IPO “We are bringing in four passenger cars and two commercial vehicles in the next two years in 14 fuel variants,”…“We are planning to invest US $250m more in the Indian market.” - Karl Slym, President of GM IndiaSource: Literature research; Booz & Company analysis 14
  • 15. 1 Integration of Asia business operations into the global value chainSuccessful MNCs have pioneered to extend their value chain toAsia Examples of Companies with Asia as Core of Global Strategies §  Globally Integrated Enterprise §  Made and Designed in China §  The New GM §  Reverse InnovationSource: Literature research; Booz & Company analysis 15
  • 16. 5 Creating a New Asian Organizational Epicenter as a Platform for Global GrowthSuccessful MNCs also shift their organizational epicenter to China ILLUSTRATIVE Analysis Framework on Companies’ Organizational Epicenter Shift and Degree of Value-Chain Migration Big Shift of Organizational Epicenter MNCs in most of the 90s Small Low High Degree of Value-Chain MigrationSource: Literature research; Booz & Company analysis 16
  • 17. There are multiple opportunities and challenges ahead for GM totake over Chinese market leadership from their competitors§  Brand strategy: §  Enhance Cadillac brand consideration and presence in premium segment through product portfolio expansion and brand marketing offensives §  Differentiate market positioning between Chevrolet brand and JV brand Bojun to maximize presence in entry level and middle market§  Product strategy: §  Develop and launch more competitive and fuel efficient SUV and MPV products to capture fast growing demand §  Accomplish profitability target and brand leadership through expansion into the premium segments (with Cadillac, Opel, etc.)§  Business strategy: §  Identify and drive up new business initiatives in line with value chain shift to the downstream market, e.g. used car business, auto finance, customized services, parts and accessories §  Introduce alternative fuel vehicles into China and study the feasibility of developing it to be a global supply base of electric vehicles§  Globalization strategy: §  Leverage low cost and fuel efficient Chinese local platforms for emerging markets (e.g. India, ASEAN) §  Supply China-made small and compact vehicles to Triad markets of GM (U.S., West Europe and Australia, etc.) 17
  • 18. Thank You! 18

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