General Motors’ price reductions in China fail to stop sales decline

Article by Christian Andrei, on June 7, 2015

For the second straight month, General Motors reported a decline in sales in China, its biggest market, even when it reduced prices on 40 models of its Buick, Chevrolet and Cadillac brands. In May 2015, a 4% drop from the previous year was reported by GM and its China joint ventures with a total of 252,567 vehicles sold.

GM said that the decline is attributed to the phasing out of outdated models and a changeover. Economic growth in China has slowed down. As a result, foreign automakers are struggling while local brands are able to widen their market share by offering more affordable SUVs. The increase in passenger-vehicle sales has been at its slowest pace in five months in April.

Majority of the expansion has been contributed by local brands. Janet Lewis, an analyst at Macquarie Group Ltd. in Hong Kong, said that consumer sentiment is “at a low point.” She explained that there’s a tendency to postpone buying when 80% of the consumers are looking for their first car. She said that GM isn’t in an especially good place in its model cycle.

Last month, GM’s prices were cut after deliveries dropped in April. Price reductions of up to 53,900 yuan ($8,700) were announced by its joint venture with SAIC Motor Corp. However, the price cuts didn’t put a stop to Buick’s decline of 13% and Chevrolet’s 2.2% drop in deliveries. Production of the Envision SUV, which broke its monthly record after selling 11,556 units, will be increased.

Cadillac sales grew 11% while there was a fourfold increase in sales of GM’s low-cost Baojun brand. GM’s sales in China increased by 5.1% for the first five months of the year to 1.47 million units. Its annual growth is forecasted to be about 6% to 8%. Matt Tsien, head of GM’s China operations, said that the vehicle market in China still grows at “a moderate pace.”

He said that this 6-8% annual growth is “significant” considering how big the size is of the largest passenger vehicle market in the world.

He added that the company is persistently reacting to shifting consumer preferences with additional new products in the high-growth SUV, MPV and luxury segments, such as the Baojun 560 and Buick Envision, and the Buick Verano and new Chevrolet Malibu sedans. Furthermore, the company is raising output to cope with the demand for the Envision.

Topics: gm, china, sales

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