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General Motors in China 2012
 

General Motors in China 2012

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An assessment of the state of the business for GM in China in 2012, including a summary of their key strategies. Presentation was delivered by Bill Russo to a conference call with investors on ...

An assessment of the state of the business for GM in China in 2012, including a summary of their key strategies. Presentation was delivered by Bill Russo to a conference call with investors on February 2, 2012.

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    General Motors in China 2012 General Motors in China 2012 Presentation Transcript

    • February, 2012 BeijingGeneral Motors in ChinaCan GM leverage China as a global platform for growth?Bill RussoFebruary 2, 2012 1
    • Part 1: Review of market developmentsPart 2: Emerging consumer trends and government policy changes in 2011Part 3: Key strategies for GM in ChinaPart 4: Conclusion and recommendations 2
    • Part 1: Review of market developmentsPart 2: Emerging consumer trends and government policy changes in 2011Part 3: Key strategies for GM in ChinaPart 4: Conclusion and recommendations 3
    • China auto industry growth rate declined in 2011 after explosiveexpansion in last few years Overall China Auto Industry by Sales Segments (Unit: ’000, 2007-2011) 18,505 Segment CAGR (’07-’11) 18,062 Total 2011 sales = 18.5 M (+2.45%) Sales of PV + 5.19% Sales of CV – 6.31% 4,020 Commerical Car 12.7% 4,313 13,645 2,246 PV-Crossover, Minicar 22.8% 2,492 3,330 497 PV-MPV 21.8% 445 1,618 PV-SUV 45.9% 9,381 1,318 8,792 1,948 2,634 249 2,494 658 1,063 988 197 357 226 446 10,125 PV-Basic 21.9% 9,494 7,461 4,727 5,040 2007 2008 2009 2010 2011 Total 20.4%Source: CAAM, GF Securities, Synergistics Limited analysis 4
    • VW and GM are leaders in the largest and fastest growing Chinamarket Passenger Vehicle Sales by Top 10 Manufacturers (2002 Vs. 2011) 000’ Unit 000’ Unit SVW 31% 302 SGM 8% 1186 FAW-VW 22% 208 SVW 8% 1166 SGM 12% 111 FAW-VW 7% 1035 Tianjin Faw 10% 96 Dongfeng Nissan 6% 809 Dongfeng PSA 9% 85 Beijing Hyundai 5% 740 Changan Suzuki 7% 65 Chery 4% 634 Guangzhou Honda 6% 59 Chongqing Changan 4% 543 Chery 5% 50 FAW-Toyota 4% 529 Geely 5% 46 BYD 3% 449 Dongfeng Nissan 4% 41 Geely 3% 433 Others 21% 197 Other 48% 6963Note: SGM Wuling is not included for this analysisSource: China PV Database; CAAM, Booz & Company analysis 5
    • Local VMs are growing market share significantly butinternational OEMs still dominate INTERNATIONAL/ LOCAL OEM CHINA PV MARKET SHARE International OEMs/Brands International OEMs/Brands Top Local OEMs/Brands 8 Domestic OEMs VW 17.76% 3.87% 15.19% Chery 3.24% 10.31% TOYOTA 5.55% China PV sales 2008-2011 (incl. import, million units) 5.67% GM1 8.80% FAW 8.18% 5.18% Hyundai 8.47% 10.1 5.11% 3.34% Geely 8.29% 2.99% Honda 4.27% 6.46% 2.86% Nissan 5.58% 5.7 71% International BYD 3.10% FORD 2.74% 2.89% 1.67% 75% Brilliance PSA 3.18% 1.37% 2.79% 29% Local Suzuki 3.14% 25% 1.08% 1.52% Greatwall 2.52% MMC 0.53% 2008 2011 0.54% 1.54% 1.14% Chang’an2 BMW 0.66% 1.41% 2008 20111) Excluding CV volumes from SAIC-GM-Wuling2) Including AVICSource: Global Insight China Report, Booz & Company analysis 6
    • The world has entered a new era since 2008, more than half of thepopulation lives in urban areas Global Urban Population China’s Urban Population Mil. 2000-2050 Mil. 1980-2020 People Forecast People Forecast10,000 1,500 8,000 Rural 1,200 Rural 6,000 900 4,000 600 70.0% Urban 58% Urban 2,000 300 47% 52% 46.7% 49.5% 50.7% 36% 26% 19% 0 0 2000 2007 2008 2050E 1980 1990 2000 2009 2015E 2020E §  More than half of the global population live in urban §  At start of reform era, more than 80% of China’s area since 2008 population was in rural areas §  Majority of China’s population will reside in urban areas by 2015 §  Creation of urban middle class fuels demand for personal mobilitySource: National Bureau of Statistics, UN, Booz & Company 7
    • It is estimated that the growth rate of PV market in China wouldslow down significantly in the next five years… Methodology for Forecast PV Sales Forecast in the Period of 12th 5-Year (in 10K units) •  Forecast methodology that combines driving factor 2,682 analysis (GDP per capita, development of road 17.9% Optimistic construction) and trend analysis (S-curve fitting) •  Compared with the data of 8-12% which is derived from experts interview / AutoInsight, the result matches well 2,304 2,034 Major Factors for Slowing Down 1,956 11.5% Balanced 1,861 1,760 •  Flattening economic growth leads to slower growth rate of 1,6841,660 8.3% Conservative auto consumption 1,639 –  Both IMF and World Bank believe that the GDP growth rate 1,5011,551 in China would be steady at 8-9% in the next two years CAGR = 1,431 27.5% –  From the experience of major auto markets around the 1,300 world, there is great relevance between GDP per capita and 1,179 PARC, and China’s auto industry would follow the same trace after three years of explosive development •  Policy favor turns from encouragement to guidance 869 –  Cancellation of three beneficial polices in 2011 will impact the sales of mid / low end cars which are major driving factors in the past two years 533 575 –  Prominent issues such as traffic jam in tier 1 cities, Beijing 446 for example, become more and more challenging, and the 12th 5-Year Plan states that “prioritization of public transportation development strategy, improvement of public transportation system in urban cities, guidance for the 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 private cars, and advocation of non-motorized vehicle”Source: SGM, CAAM, AutoInsight, Booz & Company analysis 8
    • China is still just entering the accelerated growth phase typical ofemerging markets Canada 600 Australia Discussion Germany §  A country’s threshold of 500 U.K. mobility lies near US The S- curve U.S. $10,000 GDP per capita Poland (PPP), where 400 automobile ownershipCars per 1,000 People Malaysia accelerates Russia 300 Argentina §  China is at the early taking-off stage of the S- Mexico curve 200 Brazil Turkey §  India remains fairly distant from the mobility India Thailand 100 inflection point, but Iran continues to make China Indonesia steady progress 0 India 1,000 10,000 100,000 China GDP Per Capita (Logarithmic Scale)Note: Each line of symbols represents a 19-year progression for one country, from 1990 through 2008, GDP Per Capita is in Purchasing Power Parity (PPP)Source: Booz & Company analysis 9
    • It is likely that China’s strong economic performance will continueto stimulate car industry growth for the foreseeable future China Passenger Vehicle Installed Base (PARC) Key Drivers Forecast (2009-2030) §  Car ownership in China is powered by the 600 Increase in Car growing economy – the upside is High Forecast Ownership substantial Base Forecast 500Passenger Vehicle PARC (million units) Low Forecast 480 §  Government has been continuously 400 410 Government’s guiding and supporting the industry’s Support to Auto development across manufacturing and Industry distribution 330 300 §  China’s financial system is less exposed China and GDP growth is still very fixed 200 Economy’s investment driven, thus is less vulnerable Resilience to recent financial turbulence impact 100 §  Highway network development provides Infrastructure foundation for more motor vehicle-based 0 Development based transportation 2009 2014 2019 2024 2029 §  China is investing in infrastructure to support alternative propulsionNote: Passenger vehicles contain sedans, MPVs and SUVsSource: Global Insight 2010, OPEC, DGS Report, Booz & Company analysis 10
    • Trend 2: Rapid growth of lower tier market demand87% of China’s total population live in Tier 3 and lowercities, among which 61% are from Tier 5 & 6 cities Diversity: Socio-Economic Levels of City Tiers (2009) GDP Per Capita (US$) 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Population Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 & 6Source: China Statistical Yearbook, Literature Research, Booz & Company analysis 11
    • Trend 2: Rapid growth of lower tier market demandGrowth rate of lower tier cities increasing faster than Tier 1and 2 cities Market Share by City Tier (2005 - 2008) CAGR% 100% 5% 6% 6% 7% Comments Tier 6 43.1% 18% 19% §  The 6 tier city class was 20% 21% Tier 5 34.6% identified by several indices such as GDP, sales volume etc, for 10% 11% example: 11% 12% Tier 4 35.9% –  Tier 1: Beijing 22% –  Tier 2: Chongqing 24% 24% 23% Tier 3 29.8% –  Tier 3: Wenzhou –  Tier 4: Langfang 22% 21% 21% 20% Tier 2 23.9% –  Tier 5: Xining –  Tier 6: Zhangjiajie 23% §  Need for extensive dealership 20% 19% 17% Tier 1 15.6% and service network development 2005 2006 2007 2008Source: China PV Database; Booz & Company analysis 12
    • Trend 2: Rapid growth of lower tier market demandAutomakers need to realign their product and marketing strategieswith distinctive consumer dynamics of lower tier citiesConsumer Profile Survey findings Automakers’ approach • 90% are first time car buyers Vehicle pricing to be affordable and • Car budget is 80,000RMB ($12,000) on competitive Income and average Budget Innovative brand strategy such as “Mid- • 100K CNY($15,000) disposable income annually per household market brand” development • Less financial pressure Build a trustworthy and valuable brand • More positive life attitude image Purchase • Car purchase for community and family motivation Address consumers’ roominess and care • Make less controversial choice performance needs • less product knowledge but faster Smartly decontent vehicles’ “impractical” purchase process. Purchase • Value durability, economy and electronics and features Consideration convenience Enhance vehicles’ durability and versatility • Trustworthy and value for price brand •  TV commercial, internet Take advantage of every accessible touch Information • Word of mouth is most influential point with consumers to set up emotional Channel • Outdoor ads board, car display bonding and delivery brand message • Dealer showroomSource: Nielsen 2010 Dec. China forum, Booz & Company analysis 13
    • Part 1: Review of market developmentsPart 2: Segment growth in 2010 and government policy changes in 2011Part 3: Key strategies for GM in ChinaPart 4: Conclusion and recommendations 14
    • While there is clear growth in the SUV, MPV and cross-over segments, China remains a 70% sedan market Std Lux / SUV/ 2011 PV Sales Micro Small Compact Std / Lux Mid MPV Brand Full Cross-over Market Share 6.2% 12.6% 37.0% 11.8% 1.9% 26.9% 3.6% 2,201 1186 419 803 618 1,172COPV: Crossover Passenger Vehicle - i.e. pickup and light buses with 9 seats or under Source: Accuracy Automotive, CAAM, Synergistics Limited analysis 15
    • Driven by government tax incentives and shift of productpreference, 2011 has seen a mixed results of segment growth 2011 sales Year on year Segment   Sub-segment   (’000)   growth (%)   Sales growth of SUV and MPV Vehicle sales   Total 18,505.1 2.5% outperform passenger cars Passenger Total   14,485.3 5.3% Vehicle   SUV   Subtotal   1,593.7 20.2% SUV grew much faster than other Compact SUV 2.0L and below   N/A 41.9%1) segments, and compact SUV grew 41.9% in the first half year of 2011 MPV   Total   497.7 11.7% Passenger Subtotal   10,122.7 6.6% Car   Disp.≤1.6L 497.7 3.8% 1.6L and below cars account for 69% of total passenger car sales PV by 1.6L< Disp.≤2.0L 10,122.7 14.0% displacement 2.0L< Disp.≤3L 9,821.0 -5.4% 3.0L< Disp. 3,253.5 19.9% Pickup and minibus was seen Pickup, decline of 8.9% in last year Crossover   2,271.2 -8.9% Minibus, etc.1) Growth rate for Compact SUV is for 1st half year of 2011Source: China Automotive Industry CAAM report Literature research; Synergistics Limited analysis 16 16
    • China government incentives successfully boosted sales of 2009 and 2010, however, most policies were discontinued in 2011Government Incentive Incentive Summary Impact assessment • Mar. 2009-Dec.2010 Many personal buyers pulled ahead car purchases in • 5% sales tax reduction in 2009 and Sales Tax down to 2.5% only in 2010 2009 for 5% tax incentive and stimulus effect weakened Break in 2010 • For sales of all 1.6L and below vehicles • Mar 2009-Dec.2010 • 10% off retail price, 5,000CNY at Successfully boosted sales of mini-bus and pickup, Subsidy for maximum light truck , up by 83% in 2009 and 28% in 2010 the farmers • For farmer buyers of mini-bus, pickup and light truck • June 2009-Dec.2010 Trade-in • 5,000/car, 6,000/van, 18,000CNY/ Low subsidy level and complicated trade-in process truck discouraged car owners, the effect is very limited subsidy • For trade-in of 15+ years used cars Subsidy for •  June 2010-present Successfully boosted sales in 2nd half of 2010 and • 3,000 CNY for car buyers 1.6L and • For 1.6L and below cars and require 20%+ continue to take effect in 2011 below cars better fuel efficiency than standard Source: Literature research; Synergistics Limited analysis 17
    • Part 1: Review of 2010 market developmentPart 2: Segment growth in 2010 and government policy changes in 2011Part 3: Key strategies for GM in ChinaPart 4: Conclusion and recommendations 18
    • Key strategies for GM in China 1 Localize R&D capacities to extend product reach and grow share 2 Leverage “horizontal capabilities” resident in Asia to expand market participation 3 Establish China as a high-scale platform for global expansion 19
    • 1 Localize R&D capacities to extend product reach and grow shareTo win in China, leading MNCs must expand their capabilitiesalong the value chainStage 1Circa early Product Sales & R&D Sourcing Manufacturing Marketing Serviceto mid 1990s Development Distribution §  Start a few, isolated production facilitiesStage 2Circa mid to Product Sales & R&D Sourcing Manufacturing Marketing Servicelate 90s Development Distribution §  Began to use China and India as §  Began to integrate §  Built brand for the local market a procurement source production facilities and local sales & distributionStage 3 Product Sales &Early 2000s R&D Sourcing Manufacturing Marketing Service Development Distribution §  Integrate China and India into §  Integrate China and India into §  Transfer global best practice global sourcing network global manufacturing networkStage 4Present to Product Sales & R&D Sourcing Manufacturing Marketing Service5-10 years Development Distributionhence §  Build R&D and PD centers §  Integrate China and India into global value chain 20
    • 1 Localize R&D capacities to extend product reach and grow shareGM 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 21
    • 1 Localize R&D capacities to extend product reach and grow shareCase: GM fully leverages the capabilities of its local VM partnersto become a market leader across value chain in China GM Value Chain in China R&D Parts Assemble Channel Services GM’s KSF in China §  Clear Objectives Shanghai GM (JV) –  Gain market access Covering Mid to High-end PV –  Achieve full coverage of value chain GMAC-SAIC Automotive PATAC (JV) Market –  Establish close relationship with Finance Co., Ltd. (JV) First Automotive government Shanghai GM Wuling (JV) Engineering Tech §  China’s first approved and §  Clear JV positioning and Leverage Covering Small-sized Commercial JV in China Vehicle Market operational automotive financing company the capabilities of local VM partners Shanghai GM Norsom (JV) §  By the end of Aug. 2009, total –  Joint R&D, leverage partners’ retail assets to around $1.5 Manufactures Buick GL8, Firstland Billions knowledge of local customers executive wagons and Chevrolet Cruze compact sedan –  Joint Manufacturing, leverage partners’ specialty to optimize and GM Warehousing and Trading cover different product segments (Wholly Owned) –  Joint Services, again leverage local Shanghai GM DongYue (JV) §  To ensure the quick delivery of genuine expertise and relationship with the Powertrains Manufacturing GM parts to customers in mainland government China §  Good market understanding –  Spending huge amount of money and SH-GM has one of the most sophisticated and time understanding local customers well-established dealership networks in China, covering over 180 cities and environmentSource: Literature research; Synergistics Limited analysis 22
    • 1 Localize R&D capacities to extend product reach and grow shareGM 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 23 23
    • 1 Localize R&D capacities to extend product reach and grow shareAcross 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 24
    • 1 Localize R&D capacities to extend product reach and grow share…several firms have established a business model that delivers acompetitive advantage 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 localized content. PD and some of the concerns Continuing to increase the engineering changes led by that 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% local market content for Elantra. Highly Audi: Reached established relation-ships ~70%-80% localization with local supply base and content (by value), JV ventures for domestic designed products to ER&D and PD activities meet China market Followers LeadersSource: Literature research; Booz & Company analysis 25
    • 2 Leverage “horizontal capabilities” resident in Asia to expand market participationWhich allows them to deliver products adapted to the local marketrequirements 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 26
    • 2 Leverage “horizontal capabilities” resident in Asia to expand market participationGM is a successful example of gaining competitive advantage bycooperation with local players 2011 sales = 2.55 M (+8.3%) SGM sales = 1.20M (+16.2%) SGM–Wuling sales = 1.29M (+4.8%) GM’s Sales in China Expansions of GM’s Corporate Operations (2005-2011, in Million Units) in China §  Recently, GM announced a plan to set up Shanghai 2.55 GMIO headquarters, managing the unified management 2.35 of all overseas business, which indicates the central role +25% China plays in GMs global strategy 1.83 1.54 §  GM and SAIC also announced to set up a GM-SAIC Motor Investment Co. in Hong Kong with a $1 billion 0.88 1.04 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 2005 2006 2007 2008 2009 2010 2011 §  GM’s mini-vehicle China JV (SAIC- 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 27
    • 3 Establish China as a high-scale platform for global expansionJV 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 28
    • 3 Establish China as a high-scale platform for global expansionGM - 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 (2.55 million units in 2011 §  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 facilities §  2012: Launch Shanghai GM Wuling platform based van and small cars in IndiaSource: Booz & Company analysis 29
    • Part 1: Review of 2010 market development and automakers’ performancePart 2: Emerging consumer trends and government policy changes in 2011Part 3: Emerging trends to anticipate in 2011 and beyondPart 4: Conclusion and recommendations 30
    • 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.) 31