– by Pei Dajun
Bob Socia, the new president of GM China and COO for China, India and ASEAN countries, faces six challenges as he replaces Kevin Wale despite GM’s sizeable achievement in China.
Three macro-level challenges
Socia has inherited from Wale a solid foundation of GM operations in China with four brands (Buick, Chevrolet, Cadillac and Baojun) and more than 10 factories, comparable to both Volkswagen and Toyota. What Socia has to face though, is competition in high value-added and high-performance products and branding for both the Buick and Chevrolet marques.
The first challenge for Socia is whether he can change the image of high fuel consumption for GM products. The image may be unfair, but that has been the impression among Chinese consumers.
GM and its joint venture partners have in fact been improving their vehicles’ fuel efficiency. As part of Shanghai-GM’s Drive to Green strategy that involves traditional, hybrid and electric power, the Buick Regal and LaCrosse are equipped with intelligent 2.4L SIDI engines and the GL8 and Cadillac SRX are equipped with intelligent 3.0L V6 SIDI engines. The 1.6L Ecotec DVVT engines generating 50 kW/L of power and 1.4L S-TEC III engines generating 54.3 kW/L of power have been widely used in the Buick Excelle XT, GT, Chevrolet Aveo and Spark.
It requires continued efforts in changing the image of bulky bodies and high fuel consumption of American cars. Considering the fact that Chinese consumers know little about product technology and tend to follow perceived ideas, Socia needs to work hard in order to educate the public about improved fuel efficiency and economy of GM vehicles assembled in China.
Socia’s second challenge is how to elevate the market structure of the Buick and Chevrolet brands. The two GM brands are now well established in China and the Malibu seems to have tided over the initial difficulties with price reduction. But as the bulk of sales of these two brands come from mid- to low-end products, it becomes difficult for them to move up on the value chain.
Sales of Shanghai-GM’s Buick brands were 466,010 units in January-September, led by the best-selling Excelle, which accounted for nearly half of the total, or 214,445 units. In the B-class segment, the Buick Regal and LaCrosse each maintained a sales volume of 60,000 units. Further growth seems not easy. The performance of the Epica and Malibu reflects consumer doubts about Chevrolet’s high-end models.
What GM lacks are exactly products like the Volkswagen Golf, which sells both as a low-end product at around ¥100,000 ($16,026) and higher-end one at about ¥200,000. Due to product structure, GM’s profit margins lag much behind Volkswagen.
Socia and his team need to recreate a clear and distinct product and technology images of its brands in China in order to further expand market share.
Socia’s third challenge is how to compete with Volkswagen and Japanese brands. GM sold 2.5 million vehicles in China in 2011, but the total included 1.3 million Wuling micro vehicles from SAIC-GM-Wuling (SGMW).
Socia took office when Japanese vehicles suffered a sharp sales drop. He may have struck it lucky when GM’s traditional rivals are hindered in China by political rift. But it does not mean Japanese vehicles have lost competitiveness in the market.
GM’s biggest rival in China is Volkswagen whose sales are rising even in a sliding market. Volkswagen has been squeezing into GM’s market shares in the mid- to high-level vehicle products. It is also catching up with GM’s localization capability with the Lavida and Bora.
Socia told the media three of his concerns, which are obviously his three additional challenges.
The first one is the Cadillac brand. Cadillac sales are nowhere comparable with those of the mainstream luxury car brands. The Cadillac SLS from Shanghai-GM posts average monthly sales of only a few hundred. It sold 706 units in September and the January-September sales were 4,432 units.
The peculiar personality of the Cadillac brand makes it difficult to compete with mainstream luxury brands. Socia needs much extra work in turning it around.
The second concern is the SUV segment. SUVs are a weak link for GM since it entered China. The Chevrolet Captiva which was first launched in 2007 by import has not been fully recognized by consumers. It sold only 9,259 units in the first nine months of 2012.
With the imported Buick Enclave and domestically assembled Encore, GM aims at expanding its SUV sales. But this may be Socia’s biggest challenge.
Socia’s third concern is export. Exports of GM China’s two JVs were nearly 66,000 units in January-September this year. Shanghai-GM is one of the few joint ventures in China that exports vehicles to the international market, thanks to GM’s localization efforts.
GM exports from China to regions such as Chile, Egypt and India, of which India is the most important. GM has bought back SAIC’s shares in GM India and increased its holding to 93 percent. This may affect its efforts in exporting SGMW vehicles to India and beefing up GM India’s market position.
Being the COO for China, India and the ASEAN countries, Socia’s challenge is how to leverage GM China’s operations in the Indian and ASEAN markets.
(Rewritten by Felicia Dong based on author’s article on auto.sina.com.cn)