GM To Expand Its Dealerships In China

Our man in Detroit tell us that General Motors intends to increase the number of dealerships it has across China to 4,200 from 3,800 by the end of this year. One in ten of those additional dealerships will be for Cadillac, taking the number of its dealerships to 200 from 160. Luxury marques are selling well.

Bob Socia, president of GM’s China operations, is aiming to get ahead of the growing demand for vehicles in what is now the world’s largest car market. Sales of cars and commercial vehicles are forecast to increase by 5%-8% this year, which could take the annual sales total beyond 21 million. Last year they rose 4.3% to 19.3 million vehicles even as economic growth slowed. That, though was a big improvement on 2011’s 2.5% growth in sales, hit hard by the removal of tax breaks for new-car purchases.

The biggest risk to the sales forecast for this year could be more legislation to thin traffic congestion and clean the air in big cities. Guangzhou, Beijing and Shanghai have all already done so. They may see their way to doing more on that front to, if anyone in Beijing can see anything right now. But other cities are expected to start following suit. GM’s dealership expansion could be to keep it ahead of that trend, too.

China Not Really No 1 Car Market — Yet

Chinese car sales surpassing America’s for the first time makes for a good press headline but to this Bystander the substance and the symbolism don’t hold up for long once you start to pick them apart.

The comparison is based on annualizing December’s monthly sales, giving 10.3 million vehicles in the U.S. and an estimated 10.7 million in China. Detroit’s carmakers saw year on year falls between 40% (Ford) and 55% (Chrysler) in December as recession bit. In China, growth is slowing, but the economy is still growing. November’s car sales were down year on year by barely 10%. December looks to have been a strong month.

The U.S. is a mature car buying market. Pretty much everyone who wants a car already has one, and this is no time to be upgrading existing vehicles unless you absolutely need to. Similarly corporate buyers, such as car rental companies, have little call to expand or improve their fleets. In China the car buying classes are still expanding (and creating a new market for used cars as the FT notes); fleet buyers such as local governments are being encouraged to switch to green vehicles.

In the end the raw size of China’s population will make it the world’s largest car market. How far it has to grow can be gauged from the fact that China has 40-50 cars per 1,000 residents compared with 470 per 1,000 residents in the U.S.  Assuming a return to the sales rates of Detroit’s good years and comparable car ownership levels, the arithmetic puts China’s future car market at 150 million vehicles a year.