General Motors said Tuesday it would invest $5 billion to introduce a new family of smaller cars under the Chevrolet line targeting emerging markets and co-developed by Chinese partner SAIC Motor.
The largest US automaker plans to manufacture and sell the vehicles in China, Brazil, India and Mexico and export the cars to other emerging countries, but not to mature markets such as the United States.
The first all-new Chevrolet in the program is expected in the 2019 model year, and the program is anticipated to grow to more than two million vehicles annually.
The core architecture and engine of the new vehicles are being jointly developed with state-owned SAIC, a leading Chinese automaker and a partner of GM on major joint ventures in the world’s second-largest economy.
GM said the new Chevrolet line would replace several existing offerings and that the program will benefit from global economies of scale, as well as the purchase of auto parts on a local level.
“With a significant majority of anticipated automotive industry growth in 2015 to 2030 outside of mature markets, Chevrolet is taking steps to capitalize on that growth,” said GM president Dan Ammann in a statement.
A GM spokesman said some of the development work on the new line will be led by the Pan Asia Technical Automotive Center, a 50-50 GM-SAIC joint venture that opened a new research and development center in Shanghai in 2013.
GM lists about a dozen Chinese companies in which both it and SAIC have a stake. These include manufacturing companies for sport utility vehicles and sedans and an automotive finance company. GM has more than 58,000 employees in China.
The new Chevrolet program will employ “a full range of body styles,” a spokesman said, adding that it was too soon to discuss pricing.
The new line will feature “advanced customer-facing technologies focused on connectivity, safety and fuel efficiency,” said GM executive vice president for global product development Mark Reuss.
The cars are being developed by a multinational team of engineers who will tailor entries to local preferences.
– ‘Logical’ next step –
Morningstar analyst David Whiston described the program as “a very logical next step” following GM’s progressive build-up in China.
“They’re massive in China,” Whiston said “If you’ve got a strong market there, it makes sense to try to turn it into an export hub.”
Whiston said GM could make especially strong inroads in Southeast Asia, an area long dominated by rival Toyota.
Still, news of GM’s expanded efforts in China comes at a bumpy time for the Asian giant. Its economy is slowing and a steep sell-off in the Shanghai stock market since mid-June has stoked fears about growth.
GM’s earnings conference call last week was dominated by questions about China. The automaker has cut costs in China and worked with dealers to manage inventory levels, but said it expected strong sales to continue in the second half of 2015.
GM chief executive Mary Barra pledged a smart approach to growth in China based on a “daily read” of conditions.
“We will be monitoring that closely and will only (add capacity) when we think it’s prudent to do so,” Barra said.
The US auto giant, seeking to move past a costly ignition recall scandal, has emphasized improving US profit margins and strong China sales as priorities for the next few years.
North America, China and Europe accounted for more than 80 percent of the 2.5 million cars GM delivered in the second quarter.
However, the investment program unveiled Tuesday illustrates the growing importance of emerging markets, including, but not limited to, China.
GM shares rose 1.5 percent in late-morning trade to $31.50.