Even as General Motors reported a 4% drop year-on-year in July for its sales in China, the company insists that it is still on track to reach an optimistic goal for profit margins for 2015 in this country, which is its second biggest market. In a statement posted on its website, we learned that GM and its joint ventures in China sold 229,175 cars.
It said that the drop in sales is due to the model changeovers. In June, the company reported a 0.2% increase while in May, it had a 4% decline. For the period from January to July, GM posted a 3.3% increase in sales compared to the same period in 2014.
China’s economy has been growing at its slowest pace in 25 years and the auto industry has been faltering. However, GM spokeswoman Irene Shen said that the automaker is keeping its prediction of achieving strong margins of about 9-10%, a goal that GM China chief Matt Tsien confirmed last May to be its target for this year.
James Chao, Asia-Pacific head of IHS automotive, said that the brand’s shift towards SUVs (which include the introduction of the more affordable Baojun 560) may have a negative impact on its margins in China. However, profits may go up due to a bigger contribution from the high-end Cadillac brand.
Chao said that overall, GM has a “shot” at sustaining its margins if China’s luxury market holds up. IHS predicted that GM’s production in China will be reduced by 5% in July compared with the previous year so it can avoid overproduction and to preserve its margins.
However, Chao is unsure if GM will eventually make bigger or lower cuts. GM's Shen shared that no major moves have been done to cut production but it is keeping a healthy inventory level by regularly managing its production volume. She said that the automaker hopes to increase profits in China and keep its margins by controlling expenses and improving its product offering.
There is concern among analysts and executives in the industry that overall auto sales in this country will go down for the fourth straight month this July after a crash in the stock market made buyer sentiment even worse.
Next week, the data for the entire industry are expected to be released by the China Association of Automobile Manufacturers. Partly because of the decline in the stock market, the body had cut its 2015 forecast by more than half down to 3%.