The Economist - April 28, 2007

GM...is on top in...the world's most promising car market.

Sales of cars and light trucks in China reached 7.2 million in 2006,
making it the second-largest national market behind America, and the
fastest-growing. GM's brightest hopes now lie half a world away from
Detroit in places like the southern Chinese city of Liuzhou... The
factory operated in Liuzhou by SGMW, GM's joint venture with two
Chinese firms, Wuling and Shanghai Automotive Industry Corporation
(SAIC), is bright, clean and almost as efficient as any car-assembly
line in the world. Each day it turns out more than 1,000 Chevrolet
minicars and Wuling minivans, not much bigger than a Mini Cooper and
starting at $3,500. Margins are slim but labor costs are only around
$100 per vehicle, says Tom Drumgoole, SGMW's vice-president. SGMW's
sales grew 36% to 460,000 vehicles last year, outpacing the wider
market.

GM also has a separate joint-venture with SAIC, called SGM. Its
prospects seemed dim when it was set up in 1997: the market was a tenth
of its size today and was dominated by commercial vehicles, yet the
Chinese government decreed that SGM would make cars, to be sold under
the then-fading Buick brand http://snipurl.com/hunka_junka - Last year,
however, SGM sold more Buicks in China than GM did in America. The gap
is likely to widen now that Buick is China's top car brand, says Rick
Wagoner, GM's boss. SGM has doubled the size of its Shanghai plant to
meet demand and will soon add a third daily shift to increase
production.

Another of GM's Chinese ventures is PATAC, a sophisticated design and
engineering center in Shanghai operated with SAIC. This was where they
designed the Buick Riviera, a sleek coupe that made its debut at this
month's Shanghai Motor Show. Although it is just a concept car, its
design is likely to influence new Buicks in both China and America,
hints Ed Welburn, GM's design chief.

One danger for GM is that SAIC is starting to introduce new vehicles
under its own brands, such as Roewe, outside the SGM joint venture. The
Roewe 750 http://snipurl.com/Roewe750 has been well received, and at
the Shanghai show SAIC displayed a prototype of the Roewe W2, a mid-
market family car. It will be some time before SAIC's own brands are a
match for Buick, but through its Chinese partnership GM is "supplying
bullets to the enemy," says Joe Phillippi, an analyst at AutoTrends
Consulting... For the time being, however, China remains GM's most
promising market, and one that might even enable it eventually to
regain the lead over Toyota, which made a slow start in the country.