Presentation Transcript

1. Automotive Industry in China General Motors Andrew Marx Andrew Johnston
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3. Vision of General Motors "GM’s vision is to be the world leader in transportation products and related services. We will earn our customers’ enthusiasm through continuous improvement driven by the integrity, teamwork, and innovationof GM people."
4. Company Introduction One of the world's largest automakers was founded in 1908.  Global headquarters in Detroit 208,000 employees in 157 countriesand produces cars and trucks in 31 countries GM Brands: Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Jiefang(FAW), Opel, Vauxhall and Wuling(SGMW). Vehicles Manufactured Locally through Shanghai GM (JV with SAIC) The Shanghai GM plant December 15 1998 (Buick first) JV with SAIC and Wuling (microvans and 34 percent owned by GM) In August 2009 JV with FAW to produce LDCV, and produces Jiefang GM increased its sales in China by 68 percent to 230,048 vehicles in March 2010, outsold its U.S. sales of 188,546 by 22 percent. GM Research and Technology Centre in Shanghai with SAIC, Green innovation The last emperor of China owned a Buick (Strong Brand Recognition)
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6. Why JV as Entry Strategy? Required by Government GM Shanghai formed through JV with SAIC in 1997 SAIC Motor Corp. Ltd. is the largest listed vehicle company in the Chinese A-share stock market. The main business SAIC include R&D, production and sales of vehicles (including passenger and commercial vehicles) and components closely related with vehicle development (including power-trains, chassis, electronics and electric parts) SAIC player in automotive finance business In 2009, SAIC Motor sold more than 2.72 million vehicles, continuing its leading position among major automotive groups in China. GM sold 1 001 360. JV makes good business sense (Cultural divide, access to market, technology sharing and innovation) Very successful due to mutually beneficial relationship NB!
7. Recent Developments General Motors (GM) SAIC announced a joint powertrain development program. Small displacement (1.0-1.5-liter) engines and a matching dual-clutch automatic transmission Splitting development costs Produce an engine/tranny combination that is 20 percent more efficient The new powerplants will be both direct injected and turbocharged to create a 10 percent boost in fuel economy Partnership builds on long history of innovation and collaboration Small displacement gasoline engine family targets heart of market
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9. Top 10 Competitors in China Sales in ‘09 in China In 2010 GM has sold 1,976,913 units, selling 200 000 units in the month of October alone
10. Market Information Market Share 2009 GM Owned 46% share of Small cars Car Type model Mix
11. Products in the Chinese Market

12. JV with FAW: Jiefang

    The Jiefang brand from FAW-GM, GM’s light commercial vehicle joint venture, is showing its newest product
13. Strategic Differentiation
14. Suppliers Suppliers of Vital importance (Quality and Cost) Relationships are key Conflicting Interests JV comes in handy (SAIC produces parts, and well connected in industry) Quality and low cost parts result in cheaper better cars Proximity is key (lower distribution costs) Reliable Low bargaining Power
15. Internal Value Chain Analysis Primary Activities Secondary Activities Administration & Infrustructure (Accounting) Function Human Resources Management Dealer & Supplier relations Management Profit margin Future Research & Product Design Manufactu-ring of Parts Assembling & Operations Supply chain mangage-ment Marketing & Sales Customer Service Profit margin Future
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17. Key Success Factors
18. GM Key Success Factors JV Four popular models from GM’s Shanghai GM and SAIC-GM-Wuling joint ventures finished in the top three of their respective segments in the J.D. Power Asia Pacific 2010 China Initial Quality Study, which was published on October 29. Product Range The Chevrolet New Sail ranked second in the Premium Compact Segment. The Chevrolet Spark ranked second in the Compact Segment. The Wuling Sunshine ranked second in the Mini Van Segment.  The Buick LaCrosse ranked third in the Upper Premium Midsize Segment. Strategy and Focus “GM's performance demonstrates our capability to design and build best-in-segment quality,” said Kevin Wale, President and Managing Director of the GM China Group.  “This is part of our commitment to offer the highest level of value to our customers across China.”
19. Important Trends and Facts Depleting Natural resources Increased environmental and alternative energy focus Strong competition on Innovation and quality (trying to outdo each other) “Copy and Improve” 2005 Market 10 million to grow to estimated 75 million in 2015 Increased competition due to market size, everyone is going to want a bigger share Overall slow-down in vehicle sales Tax and subsidies for small vehicles to end resulting in sales increasing during December, and slowing during first quarter of 2011 Rising oil prices, call for better fuel efficiency Growing Middle Class Expanding highway and road Network Small cars = 2/3 of total cars sold, GM = 46% share Vehicle Penetration = 5/1000 In 2007 8.5 million Chinese people bought cars (5,5 mil were private, and 3 were for commercial purposes) 52 Carmakers in China, Government focus on Concentration (International companies 85% market share) Foreign companies (not china based) are buying parts from china increasingly SAIC bought $500 000 000 worth of shares in GM Growth of Vehicle Market 46% from 08-09 (due to poor sales in 2008 – recession) Population in China 1 330 141 295
20. Green Concerns about pollution and fossil fuels deepen Centre for advanced auto research that will be part of a $250 million corporate campus GM is building in Shanghai. Collaboration with SAIC, Government and academic institutions about ways the country can reduce its reliance on fossil fuels Chevrolet Volt (Best available electric vehicle) With auto sales this year up about 25% over last year's pace, the government and consumers increasingly are worried about environmental damage. And China is only at the early stages of its adoption of the automobile.
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22. Evolution of the Chinese Auto industry Before the communist party came to power in 1949 there had been eight years of war against Japan. Virtually no motor industry to speak of at the time. 1971 China rejoined the UN and fears of war began to subside 1976 Chairman Mao died 1978 at the at the Third Plenium of the Chinese Communist party, Deng Xiaoping was endorsed as the de facto leader 1979 opened up to the rest of the world, focus shifted from Politics to Economics 1994 selected automobile industry as one of the ‘pillar industries’ to drive the national economy
23. GM Growth
24. Company Life-Cycle CHINA USA
25. Key : High - Medium - Low Porters 5 forces 6 3 8 9 10
26. Geographic Distribution of Producers
27. Distribution of Local Suppliers
28. Purchasing Power of the customer Driven by the car price relative to the household disposable income and ability to finance or lease vehicles through financial service providers Growing incomes of China, especially the emerging urban middle class Far greater selection of vehicles in the market, stimulating interest and demand Trend towards smaller sedan type vehicles
29. Demographics Population 1,330,141,295 (July 2010 est.) Age structure 0-14 years: 19.8% (male 140,877,745/female 124,290,090) 15-64 years: 72.1% (male 495,724,889/female 469,182,087) 65 years and over: 8.1% (male 51,774,115/female 56,764,042) (2010 est.) Population growth rate 0.494% (2010 est.) Birth rate 12.17 births/1,000 population (2010 est.) Life expectancy at birth total population: 74.51 years male: 72.54 years female: 76.77 years (2010 est.)
30. Key : High - Medium - Low SWOT Break down of Production costs of GM
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32. Challenges Tax and Subsidy Policy Changing 60% of sales resulting from SMGW (Wuling) Pending Price war (Many competitors and ever decreasing prices, quality no more differentiating factor) Broad Range of vehicles (may not be able to be competitive in price war) Meeting Demand (Balance growth) Margin on small cars THIN! Maintaining Sales Growth (55% higher in 2009 than 2008) Aggressive expansion by competitors Innovation theft
33. Intellectual Property The Gm Spark was released 6months later at a price of $1500 more than the Chery QQ Due to more expensive assembling cost, higher price and later release the Chery QQ outsold the GM Spark by 6 – 1. Incident was of particular interest as the JV partner of GM in China, SAIC, also hold a 20% stake in Chery QQ filed a patent in China a year prior while GM never filled a patent for their design in China and therefore had no claim in court Chery denied having copied the GM design, claiming they had developed the QQ independently “with a little inspiration from the GM Spark” China's SAIC buys $500M in GM stock – 18th of November 2010
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