This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

GM's China Growth Plans Face Speedbumps

Stocks in this article: GM VLKAY F TM HMC NSANY

NEW YORK (TheStreet) -- Leading U.S. automaker General Motors (GM - Get Report) has been struggling at home due to its worsening recall crisis, but it's expecting robust sales growth in its second home, China.

The company's president predicted 8% to 10% growth in vehicle sales in China this year, according to a report in The Wall Street Journal.

GM is the No. 2 carmaker in China, the world's biggest auto market. The company is expanding its production capacity in the country to meet the rising demand. It faces tough competition, however, from international rivals, particularly Volkswagen AG (VLKAY), which plans to spend nearly $25 billion in the country over the next four years. 

Moreover, the slowdown in China's economic growth isn't helping. China has forecast 7.5% growth in gross domestic product, but economists doubt the country will meet that target. In the first three months of 2014, the country's GDP growth fell to its lowest levels in 18 months while its manufacturing activity has shown no signs of expansion.

So far this year, GM's shares have fallen by 19% and are currently changing hands for about $33.

Last month, GM, which operates in China through joint ventures with FAW Group and SAIC Motor, reported a 6.3% year-over-year increase in sales during April. Overall, in the first four months of this year, GM has witnessed an 11% increase in sales. Over the next three years, GM plans to invest $12 billion in China. The company is building five new plants in the country. Three will be opened in 2014 and two in 2015.

The five plants will be located in some of the major cities such as Wuhan, Chongqing, Jinqiao and Shenyang. The facility at Shenyang will produce engines while the rest are going to be vehicle assembly plants. The Jinqiao facility will be used to manufacture Cadillac sedans.

As a result, the company is expecting a 65% increase in its Chinese production capacity by the end of the decade.

The company has forecast a significant increase in Cadillac sales, to 100,000 by 2015 from just 50,000 last year.

Including the new Cadillac models, GM will bring 60 new or refreshed vehicles to its Chinese customers through 2018 as it aims to improve its position in the country after losing the title of being the biggest foreign carmaker in China, in terms of vehicle sales,  to Volkswagen in 2013.

Clearly, Volkswagen poses the biggest threat to GM's growth in China. Volkswagen, which has been operating in China longer than GM, is predicting a 10% increase in sales in 2014 to more than 3.5 million vehicles.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs