China's Burgeoning Car Market: Can It Save GM?

Tuesday's Wall Street Journal featured a long article discussing China's explosively growing demand for automobiles. Many statistics were cited, but, suffice to say, it would seem that China is among, if not the most, fast-growing countries for auto sales.

Midway through the article, it is mentioned that GM won a "coveted deal for a joint venture" to produce autos back in 1997. That was nine years ago.

My consulting friend, S, and I were chatting about this incredible market opportunity for car manufacturers and marketers in China.

Doesn't it seem odd that GM, which is mired in such difficulties in the American car market, doesn't appear to be doing more to dominate China's auto industry? Or at least take advantage of a new, fast-growth market in order to establish some strong brand positions?

The article recounted the many car producers who are far from world-class manufacturers. These in include a cell phone manufacturer and the city of Bejing. It was striking how casually producers enter the Chinese auto market. There are apparently virtually no barriers to entry. From the picture painted by the piece, one is led to believe that there is very little concentration of market share, nor standards for what passes as a marketable car in China.

I should stipulate here that I do not have detailed knowledge of GM's market position in China, nor the various market shares among leading vendors. However, as my friend S pointed out, this market opportunity is so large, it doesn't take a lot of complicated planning by the wizards at GM in Detroit to figure out that it would be a good idea to try to become the market leader in the fastest-growing car market on the planet, in, by the way, the world's most populous country.

When the article went on to enumerate the economic challenges of the growth of automobile ownership in China- gasoline consumption, infrastructure, environmental safeguards, air quality, gasoline quality and refinery capabilities- it seemed to me that there would, or should, be a role in the Chinese automotive sector for an experienced car manufacturer with valuable knowledge which could help make the Chinese auto sector more efficient, productive, and environmentally friendly.

Could GM not bargain its capabilities at introducing various safety, emission controls, and modern auto design and manufacturing methods, for more access to the Chinese car market, and more control over its venture(s)? When you think of what GM should be good at, these sorts of attributes come to mind, as the result of manufacturing cars in a mature market for decades. Even GM's lack of effective car design in the US wouldn't appear to matter too much in the Chinese market, given how many small-scale vendors are apparently pumping out cars of a rather commodity-like nature.

If GM can't add value to a relatively primitive market like China's burgeoning car market, what can it do? If it can't make a compelling case for adding value for the Chinese automotive sector, maybe its weakness in the US is symptomatic of a truly global dilemma for the ailing car company.

It just seemed odd to me that a major article about the Chinese auto industry, in the major
US daily business newspaper, barely mentioned the world's largest car company. Or anything about how GM plans to take advantage of this rare opportunity to exploit a very large and very fast-growing market for its products.

This really doesn't seem like rocket science, or a planning challenge that the GM execs in Detroit would have to spend much time to formulate. In the best case, they could even create a new, subsidiary in China which they could eventually spin off to existing shareholders, thereby transferring the value-added elements of the current company from its troubled US domicile to another entity.

If GM's knowledge and people are still valuable, they should be able to add value in a new market, like China, even more easily than the mature, highly competitive American car market in which they currently are struggling.