GM raises China forecast as gov't aids auto sales

General Motors Corp., the biggest overseas automaker in China, raised its forecast for the nation’s auto sales this year after the government took steps to spur demand.

Industrywide sales may grow between 5 percent and 10 percent this year, compared with an earlier forecast for an increase of less than 3 percent, GM Asia Pacific President Nick Reilly said in Shanghai yesterday. The automaker expects its own growth to outperform the market by as much as 3 percentage points, he added.

China has scrapped some road taxes and given subsidies to rural vehicle buyers after an economic slowdown caused auto sales to fall in five of the past six months. GM is expanding its China operations because of the expected growth, in contrast to the U.S., where it’s shuttering plants and seeking a government bailout on tumbling sales.

"China this year has started quite strongly," Reilly said in a Bloomberg TV interview. "Some of this is a direct result of some of the government initiatives and others is because of the consumer confidence coming back again."

The government's rural sales push has particularly benefited GM's SAIC-GM-Wuling Automobile Co. venture, the largest minivan-maker in China, he said.

The Detroit-based automaker expects to increase its market share in China to 10 percent, up from 9.2 percent last year, Reilly said. To achieve this, it will add more dealerships and introduce new models across the three brands it offers in China, Chevrolet, Buick and Wuling, he added.

GM, the largest U.S. automaker, makes cars in China through a venture with SAIC Motor Corp., the largest domestic automaker. SAIC also holds a stake in GM-Wuling.

Global Cuts

GM is cutting 47,000 jobs worldwide this year as it strives to convince the U.S. government to lend it as much as $16.6 billion more in addition to the $13.4 billion already received. The company's Asian operations will likely escape most of these cuts because the region only sells a few brands, Reilly said.

GM's China sales growth has slowed in line with the waning local market. The automaker boosted 2008 sales 6 percent compared with a 19 percent increase a year earlier. Industrywide sales will likely grow 5 percent this year, the slowest pace in a decade, according to the China Association of Automobile Manufacturers.

Still, China's auto policies have helped temper decline in vehicles sales, enabling the country to surpass the U.S. as the world's biggest auto market for the first time in January. The government also plans to introduce incentives to spur sales in the country and to develop a market for second-hand cars and rentals, Premier Wen Jiabao said yesterday at the legislature’s annual meeting in Beijing.

China's economy, the world's third-largest, expanded 6.8 percent in the last quarter of 2008, the slowest pace in 7 years.