After suffering a blow that landed General Motors (NYSE:GM) in the backseat of China’s automotive market behind Volkswagen, the Detroit-based company is preparing a $12 billion assault of investments from this year through 2017 to bring its capacity in the region up by 65 percent by 2020, Reuters is reporting. The news comes as GM, while still seeing substantial growth, is seeing those figures start to slow.
This year, the company is expecting Chinese sales to grow by 8-10 percent. “We are investing wisely and accelerating our vehicle development and manufacturing to keep pace with market demand. In total we are investing $12 billion between 2014 and 2017,” Matt Tsien, president of GM China, said at the Auto China show in Beijing, Reuters quoted.
The company has plans to build five more production plants in China next year. But Volkswagen, which has an early-mover advantage in the country, is close behind, and is planning a growth strategy of its own. VW’s Audi luxury arm, which will target smaller megacities in central and western provinces in China, will raise the number of dealerships by about half to 500 in the next three years, chief executive Rupert Stadler told Reuters. “That’s where new business is emerging, where things get rolling,” Stadler said at the Beijing show. “We don’t need more dealers in Beijing and Shanghai.”
Adding to GM’s challenges, Ford (NYSE:F) will be releasing its Lincoln brand in the country this summer, offering another American luxury option for consumers who have been ravenously gobbling up Buicks and Cadillacs.
In total, China’s auto market saw the sales of 21.98 million vehicles last year, a nearly 14 percent leap over the year prior. That number is expected to grow again by 8 to 10 percent this year, Reuters says. As companies move into less populous areas, there is far more potential for growth, the site added.
“A large sales potential for passenger cars will develop [in the west] fairly quickly,” Reuters quoted Jochem Heizmann, head of VW’s China operations as saying. “That’s one factor driving growth besides state-induced urbanization.” Through its FAW and Shanghai Volkswagen joint ventures, VW plans to spend about 18.2 billion euros through 2018 on expansion.
GM, meanwhile, will be focusing on its Cadillac brand, which it sees as having more potential than its other brands, which are already starting to see some market saturation.
“Cadillac’s growth is on the launch of new products. We launched the XTS, which allowed us to get to the 50,000 levels. This year, we will launch another significant product and next year, we will launch another,” GM’s Tsien said.