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GM Expects China Sales to Gain 15% Next Year as Market Expands

General Motors Co., the biggest U.S. automaker, expects its sales in China to rise by as much as 15 percent next year as demand for vehicles gains in the world’s fastest-growing major economy.

“The underlying strength of the Chinese vehicle market is very strong,” Kevin Wale, GM’s China president, said in a telephone interview from Shanghai today. “Our target each year is to grow in line with the market.”

GM, which sold a $500 million stake to Chinese partner SAIC Motor Corp. as it returned to public trading yesterday, outsells all overseas rivals in the world’s largest auto market. Demand will continue to grow in 2011 even as China plans to end subsidies and other incentives that boosted sales, Wale said.

The Detroit-based automaker expects to sell as many as 2.3 million vehicles on the mainland this year, he said. Whether next year’s overall market growth is closer to 10 percent or 15 percent will depend on how much the government scales back assistance, he said.

“If the incentives completely disappear, it’s more likely to be in the lower end of that range,” Wale said.

GM closed 3.6 percent higher at $34.19 yesterday in New York after raising more than $20 billion in an initial public offering. SAIC rose 1.2 percent to close at 18.21 yuan in Shanghai today.

Biggest Market

Sales at the U.S. automaker next year will likely benefit as consumers in the smaller Chinese cities get wealthier and make their first purchases, said Steve Man, a Hong Kong-based analyst at Samsung Securities (Asia) Ltd.

China is GM’s biggest market by unit sales and its alliance with Shanghai-based SAIC has a market-leading 13 percent share.

The nation halved a small-car sales tax to 5 percent last year to spur demand, helping the country overtake the U.S. as the world’s biggest vehicle market. The tax was raised to 7.5 percent this year.

China’s car sales in October rose at the fastest pace in six months. Citigroup Inc. analysts Gerwin Ho and Ross Wei raised their forecast for China’s 2010 car sales growth to 25 percent from 20 percent in a report last month.

SAIC bought a 0.97 percent stake in GM “on the basis of a good strategic partnership between the two” and its “confidence in GM’s development prospects,” the Shanghai-based carmaker said in an e-mailed statement yesterday.

Wale declined to comment if SAIC will increase its stake. “This is a natural extension of what we’ve been doing for a long period of time,” he said.

GM said this month it will raise its stake in SAIC-GM- Wuling Automotive Co., one of the two SAIC-GM partnerships in China, to 44 percent from 34 percent. The venture builds the Sunshine minivan, China’s best-selling vehicle.

SAIC-GM-Wuling aims to take a “leadership position” in the low-cost sedan market by introducing its new brand called Baojun, Wale said. The brand will compete with local carmakers BYD Co. and Geely Automobile Holdings Ltd.

GM also owns 49 percent of passenger-car maker Shanghai GM Motor Co. SAIC holds majority stakes in both the ventures.

--Liza Lin in Hong Kong. Editors: Ian Rowley, Vipin V. Nair

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at +86-21-6104-7010 or llin15@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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