General Motors Still Trying to Recover From Slow Start in China

Sales in China slowed during the first part of 2017 after the government's new-vehicle purchase tax rose from 5% to 7.5%, but automakers are trying to slowly regain lost momentum.

Daniel Miller
Daniel Miller
Jun 8, 2017 at 10:33AM

General Motors (NYSE:GM) deserves an immense amount of credit for its forward-looking strategy in China. It entered the market years ahead of its cross-town Detroit rivals and is in annual competitions with only Volkswagen to be the country's top-selling foreign automaker. At a time when GM is pulling out of multiple markets -- Europe, as an example -- it's still forging ahead in the world's largest automotive market. Here's a look at GM's May sales results in China and how the automaker has progressed after a slower start to the year.

By the numbers

General Motors' total deliveries were pretty solid, albeit up against tough comparisons. The automaker's deliveries in May reached 294,425 units, which is essentially flat compared to the prior year but still the company's second-best May result in China ever. And it still trounces its cross-town rival, Ford Motor Company (NYSE:F) which was years late getting into China's market. Ford's sales in May totaled 87,733 units, which was a 3% decline compared to the prior year; worse yet, Ford's year-to-date sales are down 11% partly due to the industry's slow start to the year. We'll get to GM's full-year statistics in a second, but here's a rundown of its sales per GM brand in May. 

Chinese temple

Image source: Getty Images.

One of the brightest stories for General Motors in China last month was its luxury lineup. Cadillac delivered 14,154 units which was a staggering 65% increase from the prior year and a new May high. Just as impressive as its year-over-year gains is that Cadillac notched its 15th consecutive month of double-digit sales growth. In terms of which models are driving sales, the XT5 SUV remained the brand's best-selling model and recorded more than 5,000 units sold last month. The ATS-L luxury sports sedan also jumped a staggering 93% compared to the prior year, and the XTS sedan jumped a very respectable 45%.

While Chevrolet is by far GM's best-selling brand in America, Buick took the crown in China last month. Buick's deliveries totaled 94,023 units in May, much higher than Chevrolet's total of 37,571 units. Buick's Envision and LaCrosse posted strong sales of more than 16,000 units and 7,800 units, respectively. Meanwhile, GM's strategic lower-cost Baojun brand had a strong month as well. Deliveries increased to 64,075 units in May, an increase of more than 47%, and the brand will be one of the reasons GM continues to increase its volume of sales going forward as it gains market share in the more affordable SUV segments.

Still digging out of a hole

While May was a strong month overall, GM is still slowly digging out of a hole for its year-to-date sales gains thanks to a slower start to 2017 after the government increased the new vehicle purchase tax by 250 basis points which stunted demand initially. Through May GM has delivered 1.48 million units in China, a slight 3.7% decline compared to the prior year which recorded 1.54 million over the same time frame.

Despite the slow start, looking at individual brands for the calendar year-to-date, Cadillac and Baojun again produce the eye-popping gains. Cadillac's sales have jumped 86% through May, and have recorded more than 67,000 sales. Baojun has sold 34% more vehicles this year, totaling 327,676 units.

As GM gradually makes up ground from its slower sales start in China, it plans to boost sales with more than 10 new or refreshed models through the second-half of 2017. But the real trick for GM in China will be to find ways to improve average transaction prices, margins, and total profitability -- if management can make improvements in those areas, there's quite a bit of upside in China over the next decade.