General Motors in China: Coping with the Changes in the Automobile Industry

Abstract:

General Motors Company's (GM) foray into China was a successful one. Of all the leading auto markets, China was the highest growth market for GM as could be seen from the fact that it sold 2.35 million vehicles in FY 2010, 29 percent more than in 2009. This was the first time in the 102-year-old history of GM where it had sold more cars and trucks in China than in the US. Going forward, GM China had set ambitious plans to garner a market share of 14 percent and produce 5 million units by 2015. Its decision to launch a new brand, the Baojun 630, in 2011 was viewed as an attempt by the company to target first time car buyers living in Tier II and Tier III markets in China and also to compete against domestic car manufacturers in China.

Some experts opined that GM China's changing strategy was a bid to cope with the change in the industry structure in the rapidly growing Chinese auto market. According to a September 2010 draft plan by the Ministry of Information and Industry (MII) in China, foreign automakers in China were required to transfer their technology to their Chinese partner. The plan was in stark contrast to the partnership deals the foreign automakers had with their Chinese partners. The partners had a 50:50 stake in the JV where the foreign partner could keep its intellectual property and technology with it while the local partner would offer it market access. The proposed plan received mixed reactions with some foreign automakers feeling that the move was a "technology shakedown" as they were forced to share their technology with their domestic partners and eventually their rivals. Moreover, industry analysts felt that low-cost brands such as Baojun could become a threat to GM's existing brands. They were of the opinion that the move to go downmarket to target the middle-class segment could jeopardize the brand image of GM which enjoyed the reputation of launching quality brands in the Chinese automobile market. This case is meant for MBA/MS level students as part of their Strategic Management/ International Business Curriculum.

Issues:

» Understand the reasons for GM's success in China, and the growing importance of the Chinese market for GM's overall strategy.
» Discuss and debate whether the Chinese automobile industry was witnessing structural changes and what GM could do about it.
» Understand the threats to GM China's long-term success and how it could overcome these threats while taking advantage of the opportunities provided by China.

Contents:

Keywords:

Industry analysis, Structural changes in the industry, Intellectual property and technology , Technology shakedown, Internationalization, Multi-branding strategy , China's new industrial policy, China, the crown jewel in the GM Universe , Chinese Automobile Industry, Joint ventures, Partnerships, Competition, General Motors

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