SHANGHAI — General Motors (GM) is shifting its centre of gravity to China, where it sells more cars and now invests more money.
GM’s announcement at the Shanghai auto show this month that it is spending $11bn by 2016 on new plants, products and people in China demonstrates a change in priorities. GM is investing $1.5bn in North America this year, where it has a more modest factory footprint.
GM’s focus on China parallels the strategy Toyota employed in the last century, when the car maker poured investment into the US market, where it saw its greatest growth potential.
Now, Detroit-based GM is taking the lead in the world’s largest vehicle market by building four new assembly plants in China to boost its factory capacity to 5-million vehicles annually, twice what it sold in the US last year.
"This is what the Japanese did in the 1970s when the US became their most important market," said Rebecca Lindland, an automotive consultant with Rebel Three Media & Consultants in Cos Cob, Connecticut.
"What GM is doing is really smart because it is proactively investing in a market that … is going to be the world’s largest."
GM rose to a 52-week high of $30.71 last week. It fell 0.7% on April 26 to $30.50. It has gained 5.8% so far this year compared with an 11% increase in the Standard & Poor’s 500 index.
The US car maker already is the top car manufacturer in China, with 15.1% of the market in the first quarter, on growing sales of Buick and Chevrolet models and a thriving commercial-vehicle joint venture.
China is central to CEO Dan Akerson’s plan to diversify GM’s sources of profits globally.
While North America remains GM’s biggest profit centre, China has emerged as the leader in other key measures — sales, output and investment. Analysts said it was just a matter of time before China became GM’s biggest profit centre.