GM China Head Stays Cool Despite Daunting Agenda

WUHAN, China – With the local automobile market softening, an aggressive agenda of new plant rollouts planned and a mandate to build Cadillac into a key player in the luxury sector, it would make sense if GM China President Matt Tsien were a tad nervous about 2015.

Except he doesn’t appear to be.

Asked what worries him about the coming year, Tsien points to the new product- and plant-launch agenda that ultimately will see at least five new manufacturing facilities come online and 60 new or refreshed vehicles rolled out over the next four years.

But then he dismisses any real anxiety, telling WardsAuto on the sidelines of the Global Automotive Forum here, “The good thing is that both Shanghai-GM and SAIC-GM-Wuling (two of the automaker’s three primary vehicle-building joint ventures in China) have been good until now in terms of getting plants on line, getting the quality right.”

The confident Tsien also appears unfazed by the slowdown that has seen industry light-vehicle sales growth ease to 7.7% so far in 2014, from double-digit levels in years past. He predicts market speed will pick up, with the year finishing at about a 10% gain, but says, ultimately, any decline in the growth rate isn’t necessarily a bad thing for China.

The China Association of Automobile Manufacturers is less bullish on 2014, forecasting this week sales would climb only 4.6% above 2013 levels, down from a prediction of 8.3% earlier in the year, according to a Bloomberg report.

“I know there’s a lot of discussion of late about the moderation in the overall economy and what that might do,” Tsien says. “But I think the economy here has been managed very well. And as long as the economy continues to grow at the current level, I think the auto industry will be fine.”

He tells the GAF crowd later: “I think that the pace has slowed is good for the auto industry. Moderation is not unusual or unhealthy. Ten-percent growth (in this market) is still 2 million units annually – that’s huge by any standard.”

Overall slowdown or not, GM is pushing aggressively ahead here. Its expansion plans call for investment of $14 billion between now and 2018 to open four vehicle-manufacturing plants and a powertrain facility to support a sales target of just under 5 million vehicles annually, up from about 3.2 million today.

And reports surfaced this week that a sixth new plant may be in the works for SAIC-GM-Wuling in Liuzhou to build Baojun-brand vehicles. GM is not commenting on those reports.

The confirmed factory list includes a new 160,000-unit-capacity Cadillac plant under construction at Shanghai-GM’s Jinqiao operations and a 300,000-unit facility just launched in Shenyang for Chevrolet Cruze production, plus output of 450,000 engines per year there.

A factory in Chongqing will produce the more budget-minded Wuling models and a new Wuhan facility will build yet-to-be-named vehicles. Both are expected to be completed within 12 to 18 months, as is the Cadillac plant.

Key to the new-product assault will be nine new SUVs that Tsien says will fill the lineups of each of the four brands here, Chevrolet, Buick, Cadillac and Baojun.

“The compact-car segment, the C-segment, is the largest in the marketplace today, and it will continue to be the largest segment in terms of the sheer number of vehicles,” he says. “But when you talk about the segment that’s probably going to have the largest growth, that’s SUVs.

“We expect by 2020, SUVs, alone, will be about a 7 million-(unit) vehicle segment,” he says. “So (there’s) a huge opportunity, obviously.”

Nine is a big number, but the new SUVs will “cover the whole gamut; they’ll go all the way from entry level to luxury,” Tsien adds. “If you take a look at the brands we have, just one or two SUVs in each of the brands pretty much gets you to that number.”

GM China recently launched the small Chevrolet Trax model into the segment and this week announced prices for the new Delta-based Buick Envision midsize SUV now hitting the market starting at RMB269,900 ($44,000).

Tsien sees prospects in the multipurpose-vehicle sector, as well.

“We are already quite a strong player, actually, from an MPV standpoint,” he says, pointing to the successful Buick GL8 (a version of the Buick Terraza minivan once sold in the U.S.), Wuling Hong Guang Series and recently introduced Baojun 730.

“We have the MPV space pretty well covered, (but) I think there’s opportunity for further growth in the segment.”

The third leg in GM China’s expansion stool is the Cadillac brand, which is forecast to sell 70,000 units this year but targeted to climb to 150,000 by 2016 before quadrupling from today’s levels to 300,000 per year in 2020. That task is one Tsien shares with Johan de Nysschen, who heads a now-independent Cadillac global operation.

The luxury brand will reach its ambitious target “through great product and great service,” Tsien says, plus a judicious expansion of its dealer body, which now numbers about 150.

“We don’t want to overgrow our dealer network,” he says. “Our relationship with the dealer has to be a win-win. So we will grow our dealership (ranks) as our portfolio expands and as our overall market expands.

“I think luxury is one of those areas where you have to be really quite thoughtful in terms of how you set up your network and how the dealers are trained and the products defined and executed.”

GM China also plans a technology push. Tsien uses the forum here to announce it will be the first in the country with OnStar 4G LTE and Wi-Fi hotspot connectivity, beginning with a Cadillac model in 2015.

He also says GM’s Super Cruise hands-free driving technology will come to China “soon after” it makes its U.S. debut on the new Cadillac CT6 flagship sedan due as a ’16 model.

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