On Tuesday GM’s CEO Dan Akerson explained why the company could very well build the Volt in China, as it is the hot new frontier in which GM is already well positioned to reap a harvest.
For now, GM will ship the Volt in from the U.S., Akerson told the press at a Bloomberg News forum, but it could be a costly experiment as the Volt is ineligible for over $19,000 in government incentives as GM tests the Chinese waters.
"We're going to export into China for probably a year or two and see if it gets a take … if customers set the right usage patterns," Akerson said. "If it does, we may manufacture it there."
A Volt on the road to Shanghai.
Akerson denied allegations that China has pressured GM to fork over intellectual property and said it is making these decisions all by itself.
The new automotive market paradigm GM envisions is a more collaborative one, as evidenced by GM’s recent big plans to build EVs in China with joint venture partner SAIC, and its formation of its venture capital firm last year charged with finding new opportunities and given $100 million in seed money to do it.
"We don't invent everything ourselves," Akerson said, explaining GM’s new perspective. "We either build, buy or we partner."
And to be sure, this partnering phenomenon has quickly become the new pattern for several major and minor industry participants, with more collaborations expected.
China is Hot, America is not
In the next decade, Akerson said, the Chinese auto market growth could equal the total sales in the U.S. market. That is, auto sales in China could increase by 13 million vehicles, he said, which is on par with the present U.S. total.
"This is where you want to be strong," Akerson said.
And really, GM has been playing this strategy already. Last year its China sales were up 30 percent. This year, according to the Detroit News, they are only up by 5.4 percent through August, comprised of 1.6 million vehicles sold.
To get things back toward 2010 growth levels and beyond, GM intends to invest between $5 and $7 billion over the next five years in China as it introduces 60 new or significantly refreshed models, the Detroit News reports.
The goal of GM's five-year plan in China is to bump total annual sales there to 5 million vehicles.
While a five-year plan sounds like something the Communists would come up with, make no mistake, this is fully in line with ideals born in The Land of the Free, and Home of the Brave.
In thinking as it is, GM is also being true to its shareholders, many of which saw GM’s strong Chinese market position as a reason after its bankruptcy to add their dollars toward the New GM's record-breaking $23 billion initial public offering.
What's more, JPMorgan Chase & Co. Vice Chairman James "Jimmy" Lee – who helped GM launch its IPO – told the Detroit News that GM's strength in China was a key factor in drawing not just U.S., but international investor interest.
"When we sat down with investors worldwide, they were really excited with respect to China" and GM's strengths, Lee said.
Inherent in GM’s decision making process is a lack of faith in the American economy to be anywhere near as promising as China's.
In contrast to a Chinese auto market that is booming, Akerson said he believed the U.S. market will be “flat” next year, although GM’s September sales – expected to be announced Monday – were still “not that bad.”
Presently the U.S. Treasury Department holds a 26.5 percent share in GM. Akerson praised the Treasury for staying hands off, and not sending a representative to sit in on board meetings – including the most recent one held in China.
But whether or not the government sits in on meetings, it and the taxpayers it represents are still along for the ride. At GM’s current stock price, if the Treasury sold its stake now, it would mean a loss of about $16 billion out of its $49.5 billion committed for the bailout.
In front of a sundial in Shanghai.
The government has expressed interest in shedding its GM holding, but not at such a loss.
Unknown is whether its leaving GM free of interference represents tacit approval of GM's policy.
As it is, Akerson outlined plans for investing in China for the company that is yet one-quarter owned by U.S. taxpayers, and defended the U.S. Treasury Department loans as not merely saving a company, but rescuing an industry.
Speaking of which, in the heyday of that industry in the early 50s, it was said that "what was good for the country was good for General Motors and vice versa," and perhaps GM would still contend that what it is doing is for the greater good.
Today there are fewer people inclined to see the clarity of such assertions as billions in technology, manufacturing know-how and jobs are going offshore at a time when the U.S. needs all the help it can get.
To be sure, GM is also making efforts to invest in U.S. manufacturing, but this could arguably be called enlightened self interest too, as sourcing and producing close to the point of consumption can be good for business.
The Volt in China
For now, the Volt will not be produced close to its point of Chinese consumption, thus its value proposition will be reduced without subsidies available for domestically produced EVs.
Certainly there are those in China with the disposable income to pay up for one of the world’s most advanced automobiles, but selling it in larger numbers will require some adjustments to put the Volt in a more attractive position.
Aaron Bragman, an IHS Automotive analyst told the Detroit News building the Volt in China could “make sense.” Assuming subsidies, GM could make significant money with the Volt in a burgeoning Chinese market heavily favoring electrified vehicles.
GM could conceivably also export Chinese made Volts to other markets.
Since setting up shop in China a decade ago, GM has kept (at least some) of its intellectual property safe, and actual risks to the Volt are open to speculation – although with the prospect of building the Volt there already on the table, GM is apparently not too worried about it.
Even more clear at this point, however, is the siren song of a bright and promising new market being sung by China. It is one that GM finds irresistible and undoubtedly it will do what it takes to succeed there, as Bragman also observed.
"If you want to participate in the Chinese market, you have to play by their rules," Bragman said.
Detroit News
For now, GM will ship the Volt in from the U.S., Akerson told the press at a Bloomberg News forum, but it could be a costly experiment as the Volt is ineligible for over $19,000 in government incentives as GM tests the Chinese waters.
"We're going to export into China for probably a year or two and see if it gets a take … if customers set the right usage patterns," Akerson said. "If it does, we may manufacture it there."
A Volt on the road to Shanghai.
Akerson denied allegations that China has pressured GM to fork over intellectual property and said it is making these decisions all by itself.
The new automotive market paradigm GM envisions is a more collaborative one, as evidenced by GM’s recent big plans to build EVs in China with joint venture partner SAIC, and its formation of its venture capital firm last year charged with finding new opportunities and given $100 million in seed money to do it.
"We don't invent everything ourselves," Akerson said, explaining GM’s new perspective. "We either build, buy or we partner."
And to be sure, this partnering phenomenon has quickly become the new pattern for several major and minor industry participants, with more collaborations expected.
China is Hot, America is not
In the next decade, Akerson said, the Chinese auto market growth could equal the total sales in the U.S. market. That is, auto sales in China could increase by 13 million vehicles, he said, which is on par with the present U.S. total.
"This is where you want to be strong," Akerson said.
And really, GM has been playing this strategy already. Last year its China sales were up 30 percent. This year, according to the Detroit News, they are only up by 5.4 percent through August, comprised of 1.6 million vehicles sold.
To get things back toward 2010 growth levels and beyond, GM intends to invest between $5 and $7 billion over the next five years in China as it introduces 60 new or significantly refreshed models, the Detroit News reports.
The goal of GM's five-year plan in China is to bump total annual sales there to 5 million vehicles.
While a five-year plan sounds like something the Communists would come up with, make no mistake, this is fully in line with ideals born in The Land of the Free, and Home of the Brave.
In thinking as it is, GM is also being true to its shareholders, many of which saw GM’s strong Chinese market position as a reason after its bankruptcy to add their dollars toward the New GM's record-breaking $23 billion initial public offering.
What's more, JPMorgan Chase & Co. Vice Chairman James "Jimmy" Lee – who helped GM launch its IPO – told the Detroit News that GM's strength in China was a key factor in drawing not just U.S., but international investor interest.
"When we sat down with investors worldwide, they were really excited with respect to China" and GM's strengths, Lee said.
Inherent in GM’s decision making process is a lack of faith in the American economy to be anywhere near as promising as China's.
In contrast to a Chinese auto market that is booming, Akerson said he believed the U.S. market will be “flat” next year, although GM’s September sales – expected to be announced Monday – were still “not that bad.”
Presently the U.S. Treasury Department holds a 26.5 percent share in GM. Akerson praised the Treasury for staying hands off, and not sending a representative to sit in on board meetings – including the most recent one held in China.
But whether or not the government sits in on meetings, it and the taxpayers it represents are still along for the ride. At GM’s current stock price, if the Treasury sold its stake now, it would mean a loss of about $16 billion out of its $49.5 billion committed for the bailout.
In front of a sundial in Shanghai.
The government has expressed interest in shedding its GM holding, but not at such a loss.
Unknown is whether its leaving GM free of interference represents tacit approval of GM's policy.
As it is, Akerson outlined plans for investing in China for the company that is yet one-quarter owned by U.S. taxpayers, and defended the U.S. Treasury Department loans as not merely saving a company, but rescuing an industry.
Speaking of which, in the heyday of that industry in the early 50s, it was said that "what was good for the country was good for General Motors and vice versa," and perhaps GM would still contend that what it is doing is for the greater good.
Today there are fewer people inclined to see the clarity of such assertions as billions in technology, manufacturing know-how and jobs are going offshore at a time when the U.S. needs all the help it can get.
To be sure, GM is also making efforts to invest in U.S. manufacturing, but this could arguably be called enlightened self interest too, as sourcing and producing close to the point of consumption can be good for business.
The Volt in China
For now, the Volt will not be produced close to its point of Chinese consumption, thus its value proposition will be reduced without subsidies available for domestically produced EVs.
Certainly there are those in China with the disposable income to pay up for one of the world’s most advanced automobiles, but selling it in larger numbers will require some adjustments to put the Volt in a more attractive position.
Aaron Bragman, an IHS Automotive analyst told the Detroit News building the Volt in China could “make sense.” Assuming subsidies, GM could make significant money with the Volt in a burgeoning Chinese market heavily favoring electrified vehicles.
GM could conceivably also export Chinese made Volts to other markets.
Since setting up shop in China a decade ago, GM has kept (at least some) of its intellectual property safe, and actual risks to the Volt are open to speculation – although with the prospect of building the Volt there already on the table, GM is apparently not too worried about it.
Even more clear at this point, however, is the siren song of a bright and promising new market being sung by China. It is one that GM finds irresistible and undoubtedly it will do what it takes to succeed there, as Bragman also observed.
"If you want to participate in the Chinese market, you have to play by their rules," Bragman said.
Detroit News
