General Motors Co. and its partners in China formally opened Sunday a new plant in the country for its low-cost no-frill Baojun brand. GM’s new plant in Liuzhou, China will be the second factory to produce vehicles by Baojun, a unit that has starting price of as low as CHY40,000 ($6,400). The opening of the new plant is expected to further turn up the heat of the rivalry between foreign-led joint ventures that manufactures low-cost units for China’s middle class.
It is also expected to increase further the pressure on local entry-level carmakers like Chery and Geely. According to U.S. consulting firm Alix Partners, it is estimated that by 2013, around 65.6 million households in China will have annual incomes of CHY60,000 or more – which is enough for a family to acquire a low-cost car.
Nissan Motor Co. earlier launched the second of five models of its low-cost Venucia marque that the carmaker and its local partner plan to roll out in China by 2015. Nissan targets to sell 300,000 Venucia cars annually by 2015. GM's new plant in Liuzhou, which operates as part of the SAIC GM Wuling Automobile Co. joint venture, will eventually have an annual production capacity of 400,000 cars.
According to GM officials, the Liuzhou was likely to build vehicles not just for Baojun but also for the venture’s other low-cost brand Wuling. GM invested around CHY8 billion for the first phase of construction of the Liuzhou plant, where the Baojun 630 rolled off the assembly line on Sunday. So far, it builds two products for Baojun: the 630 compact sedan that carries a starting price of CHY62,800, and the Le Chi mini car.
Bob Socia, President of GM China and GM’s Chief Country Operations Officer of its ASEAN, India and China operations, stated that the SGMW has made many incredible achievements in the past decade. It has established an international benchmark for high-value yet low-cost car manufacturing. Its modern facility has also ensured its stable growth in the biggest vehicle market in the world.
Shen Yang, SGMW President, also added that the passenger car manufacturing segment signals a major milestone in its latest joint venture. It will set a solid and strong foundation for SGMW’s expansion in the passenger car arena.
SGMW is also enhancing its R&D technology when the production base of the passenger car is finished. It will be integrating testing resources and engineering design to build an efficient system for technical research and product development. The primary purpose is to support the general development and production strategy of SGMW by achieving up to 2 million car sales annually, expanding its export operations, and advancing its technology within the period of 12th Five-Year Plan in China.
Founded on November 2002, SGMW is owned by SAIC, GM China and Wuling Motors with 50.1%, 44.0% and 5.9% stake respectively. Based in the province of Liuzhou, the joint venture builds and sells Wuling minivans and mini-trucks and the Baojun brand of passenger cars. In the year 2011, SGMW has sold 1,285,820 units in China alone.