Economy, Auto

GM Pushing for Emerging Markets

GM Pushing for Emerging Markets
GM Pushing for Emerging Markets

General Motors is planning to spend $5 billion over the next several years to develop a new range of technology-rich small cars, based on a common architecture that will be built and sold under the Chevrolet name in China, Brazil, India, Mexico and other emerging markets like Iran.

GM, which is co-developing the architecture and engines with Chinese partner SAIC Motor Corp., aims to have the first of the cars in production by 2019 and expects the program eventually to account for sales of more than two million vehicles a year, GM President Dan Ammann said.

Through the effort, GM is hoping to leverage its scale and leap ahead of competitors in markets that are expected to drive much of the global growth in automobile sales over the next 15 years.

“We are making clear where we see growth opportunities and where we are placing our bets,” Ammann said. “We are making an investment in the future of the company.”

The program also reflects a shift in how automakers are approaching emerging markets, where consumers and regulators are quickly demanding more advanced technology in vehicles.

In the past, western automakers typically served these markets with very low-cost, bare-bones cars, or produced stripped-down versions of vehicles that had reached the end of their product lives in mature markets.

Ammann said GM believes neither approach will work in the future.

“We believe customer requirements are moving very rapidly in these markets,” Ammann said.

Consumers and regulators in emerging markets “want to have connectivity, good fuel economy and the right levels of safety [technology]. In order to provide the feature and content level, we need to come at this from a different way and from a different level of scale.”

Ammann also said GM believes it can take advantage of economies of scale to be able to produce content-rich cars that it can sell at affordable emerging-market prices and still generate “the right kind of returns” for the company.

The new architecture GM plans to develop will replace several lines of unrelated vehicles now sold overseas, although Ammann declined to specify which current models would be affected. He said the result would be a “significant consolidation” of platforms and align with GM’s broader effort to produce almost all of its vehicles from just four vehicle sets by 2025.

The company currently derives about 75% of its models from 14 core architectures.

The new small cars will be produced in existing plants that will be retooled for the new, low-cost architecture, and will include a range of different body styles. Ammann declined to offer further details but said GM has no plans to sell any of the vehicles in the US or Europe.

In addition to GM’s $5 billion investment, SAIC will also spend an unspecified sum on the project. The project represents a deepening of GM’s ties to SAIC. It will be the first time the two companies have developed a platform together.

Analysts expect global production to climb to more than 130 million light vehicles by 2030, up from about 90 million last year. Almost all of the growth will come from emerging markets. China alone is estimated to grow to about 40 million vehicles by 2030.

SAIC is already in the Iranian market, selling MG branded mid-tier vehicles in the market for the past few years. GM, on the other hand, has no share in the Iranian market and has been absent since the early 1980s.

Iran could become one of the intended target markets for the jointly developed platform, due to its expected post-sanctions economic boost and large domestic demand.