VIENTIANE, Laos – General Motors’ strategy to expand into emerging Southeast Asian car markets appears to be a smart move judging by its early success here.

GM officially inaugurated its presence in Laos with the grand opening of its new flagship dealership at a lavish ceremony in the capital city last Novermber, led by Minister of Finance Phouphet Khamphounvong.

The occasion marked an important step in the auto maker’s plan to introduce the Chevrolet brand into the potentially lucrative 10-member Association of Southeast Asian Nations.

Owned and operated by the Manignom Auto Group, a Laotian industrial conglomerate with automotive industry experience, the new LAK303 billion ($40 million) state-of-the-art facility set a benchmark for GM. At 53,820 sq.-ft. (5,000 sq.-m), the dealership is the region’s largest.

“We believe in Chevrolet and GM, and we see opportunities in (the) Laos automotive market in the future,” says Phuvares Kongwatthanasupa, Manignom’s managing director.

“GM is upbeat about its prospects in this emerging market,” says Akshay Jaising, director-export sales and Southeast Asia distributor operations for the U.S. auto maker. “We are extremely excited about launching Chevrolet in Laos and believe our strong portfolio of products will be well-received.”

Manignom President and CEO Souksamone Sihathep says the Laos automotive market is small but growing rapidly, noting his group sees “a trend of more people buying new cars in what used to be a predominantly used-car market.”

The country’s economic indicators back this up. Laos has a population of 6.5 million, with 30% living in urban areas. Jaising describes Laos as having “robust growth,” with gross domestic product forecast to grow at an average annual rate of 7.6% from 2013 to 2015, according to the World Bank.

Manignom set a benchmark in dealership spending with GM’s Laos facility, reflecting its strategy of not cutting corners in an effort to become a significant player in whatever market it enters. Choosing a U.S. brand was an easy decision, reckons Kongwatthanasupa. “Chevrolet has a long history and is experienced in worldwide markets (dating back) 100 years.”

Chevy’s broad product portfolio underpins Manignom’s aims as well, covering all the market segments, from small sedans to sports cars, pickups and SUVs, he says. “We would like to be the new alternative for Laos people who are looking for high-quality vehicles and service excellence. We need to build Chevrolet brand loyalty.”

With an operation to match, there will be “no bargaining with price, like is common with Chinese brands,” Kongwatthanasupa says. Instead, Manignom “aims to (offer) good quality vehicles and aftersales.”

Hyundai-Kia recently has overtaken Toyota as the market leader in Laos, but Manignom believes Chevrolet products can more than match its competitors, especially in terms of reliability and aftersales support. Other rivals include Nissan, Ford and Mazda.

Preparation for the Chevrolet dealership was meticulous. Six to 10 months before its opening, Maningnom sent its sales and aftersales teams to a number of countries for GM training. “This is because we give priority to GM standards,” Kongwatthanasupa says.

Strong Range of Chevy Products

He sees the Chevy Colorado pickup accounting for about 50% of sales here, SUVs making up slightly less than a third and sedans accounting for the rest. Getting out of the block quickly depends on a broad and targeted product mix.

“We have a strong range of products that are well-suited for Laos customers, ranging from the Spark and Sail in the small-car segment to the all-new Colorado in the pickup segment,” Jaising says. “We are also looking at the prospect of bringing the Trailblazer to Laos to add some excitement to the popular 4x4 SUV segment.”

Maningnom’s 2013 sales target is 1,100 units for the current product lineup, excluding future launches that will come thick and fast, Kongwatthanasupa reveals.

“We may have incremental products (this year) such as the Trailblazer, Sonic and Malibu, and when included with current products, we will cover all market segments.”

Jaising says the Malibu is being considered for both Laos and the Philippines, but no decision has been made yet. If approved, the sedan will arrive completely built up from Korea.

Kongwatthanasupa is upbeat about future products, based on the instant reception of current models since their launch here.

GM is satisfied its cars will suit Laotian roads and conditions. “The Laos market is quite similar to the Thai market except for the fact that it is a left-hand-drive market,” says Roberto Rempel, GM global vehicle chief engineer-midsize trucks. However, the (LHD) setup exists in other countries in the region as well.

“Before launching a product, we rigorously test the vehicle in varying weather conditions and setups like high and low altitudes (and) lower and higher temperatures, which are specific to that region,’ he says. “We are confident that these tests cover a complete expanse of all situations that the Laos customer would encounter.”

Rempel says there is no homologation requirement for Laos, and that GM’s key issue here is to ensure its vehicles match local fuel standards. GM's extensive fuel database allows the engineering team to understand a vehicle’s performance and emissions with a certain type of fuel available in a region.

In terms of marketing, Manignom Group is spending big to build brand awareness. The marketing budget for 2012 was LAK3.1 trilllion ($400,000) and is expected to rise 40% or 50% this year.

By any stretch, that is a robust spend. Says Kongwatthanasupa, “Our budget (was) quite high in the first year and will continue for another two years, because we came to market later than other major players.”

Building Chevy Brand Recognition

Chevrolet doesn’t have wide recognition here, he notes and there is a need to make up ground. The push started early in 2012, as Manignom rolled out a campaign to develop awareness ahead of the dealership launch.

“We used the 100-years Chevy logo on newspapers and major billboards around the Vientiane capital and major provinces on a daily basis for six months in advance before we began to operate sales,” Kongwatthanasupa says.

With the dealership’s summer soft launch, the marketing strategy ratcheted up. “We changed all artwork for product advertising (and) launched a (car-loan) campaign with low interest rates and low down payment.”

Manignom also organized “a road show and display of our cars at prime areas around the Vientiane capital on a weekly basis” and offered opportunities to win cars in contests, sponsoring key music awards and recruiting Miss Laos as a brand ambassador.

Manignom continues pushing ahead so that sales start balancing out its investments, with plans to open a second showroom this year. In the 2014-2015 period, three more dealerships will open in the north. There also will be a satellite showroom in the capital city, all of which will provide the group with broad footprint in the major population centers.

The Laos market is expected to grow fast, and Manignom has its eye on the long term when it reaches a tipping point where complete-knocked-down kits becomes viable. The plan is to expand its Chevrolet business here and it is mulling market size, investment and tax incentives.

With CKD and semi-knocked-down kits in mind, Manignom already has acquired a significant plot of land with a long-term lease for a future plant.

GM has an aggressive growth strategy of its own for the ASEAN region that includes both the more-established car markets as well as the new frontiers such as Laos and Cambodia.

“In terms of population and total auto-market size, Cambodia is larger than Laos,” Jaising says. “However, almost 90% of the total car sales there are used cars. We see good potential for new-car growth.”

To date, GM has invested a total of $2 billion in manufacturing facilities in ASEAN, particularly in Thailand and Indonesia.

In September 2011, the auto maker opened a new $200 million state-of-the-art powertrain facility, adjacent to its manufacturing facility in Rayong province, Thailand, marking its most significant investment in the region in more than a decade, and its first engine plant.

“We are working towards maximizing our plan to build where we sell and source where we build in ASEAN, as we continue to develop and stabilize availability of local suppliers to support ASEAN and GM’s global supplier footprint,” Jaising says.

“In 2012, Chevrolet had a slew of new product launches in the region starting with the Colorado, followed by the Sonic notchback and hatchback variants and the Trailblazer. We can barely keep up with the demand, and that is why we are expanding existing manufacturing facilities and adding new dealerships from Vientiane all the way to Jakarta.”

GM is expanding its dealer network in Thailand to 120 dealers by end of this year, he says. “Similarly, we are expanding our presence in Indonesia and hope to reach 55 Chevrolet dealers by the end of 2013.”