So far so good for General Motors (NYSE:GM) in China in 2013: GM announced on Tuesday that its sales in the first two months of the year were up 7.9%.
That's a respectable gain that comes even as key Japanese rivals like Toyota (NYSE:TM) have reported declines, suggesting that GM, powered by solid results for its Buick and Chevrolet brands, could be gaining ground in the world's largest auto market.
GM gains ground as Japanese rivals struggle
Not so long ago, the big Japanese automakers seemed poised for success in China, but nationalist feelings sparked by a territorial dispute between China and Japan last year led to sharp declines in sales for Toyota, Honda (NYSE:HMC), and Nissan (NASDAQOTH:NSANY).
Toyota's 2013 sales through February were down 13.3% from year-ago totals, suggesting that the Japanese giant – the leader in global sales in 2012 – still has work to do to repair its reputation in China. Honda and Nissan saw 4.1% and 14.1% declines over the same period, respectively.
Automakers doing business in China prefer to report January and February sales as a single combined total because of China's week-long New Year's celebrations, which sometimes fall in January and sometimes in February. Strictly speaking, nearly all automakers saw big increases in January and year-over-year declines in February this year – because those celebrations fell in February in 2013 and in January in 2012.
Meanwhile, General Motors, and in particular its Shanghai GM joint venture, which sells Buick, Chevrolet, and Cadillac models, has continued its steady growth trajectory so far in 2013.
Continued progress for GM's key brands
Shanghai GM's sales were up 12.4% to 255,243 units in the first two months of 2013, a good gain and a record for the period. Highlights included strong sales for the upscale compact Buick Excelle XT hatchback and GT sedan, which saw sales rise more than 20% in February despite the holiday week. The Excelle GT and XT, China-only models that are closely related to the Buick Verano compact sold here in the U.S., have been consistently strong sellers for GM since their introduction in 2010.
Sales of the Chevrolet Malibu more than doubled in February, GM said, and the brand also saw a 22% gain for its Sail in February. The Sail, the first Chevy designed in and built specifically for the Chinese market, is an entry-level subcompact car that has been one of China's best-sellers since its introduction in 2010.
Cadillac sales were up on strong results for the SRX crossover, which is GM's key representative in the premium-SUV niche that has been one of China's hottest automotive segments in recent months. Cadillac's overall China volumes are still tiny, especially in comparison with those of GM arch-rival Volkswagen's (NASDAQOTH:VLKAY) white-hot Audi brand. Increasingly, there are hints that GM has an ambitious long-range plan for Cadillac in China (and elsewhere), but such a plan is expected to take several years to implement.
Meanwhile, while VW hadn't posted its February sales results as of press time, it's likely that GM continues to hold a small lead over VW for the overall sales lead in China – even as it struggles to catch up with VW's huge lead in profitability.
The upshot: Steady sailing in China for now
Here's the takeaway: GM's China operation continues to show steady gains. While there's room for significant improvement – most notably in profit margins, where VW's lead is huge thanks to design and production efficiencies and a much more favorable product mix – GM's Chinese joint ventures continue to be well-run and to generate solid quarterly returns.
That means, for better or worse, that major changes to GM's business in China aren't likely anytime soon. With so much of GM's senior executives' attention focused on more pressing challenges, like revamping GM's European operation and overhauling its U.S. product line, GM's China story is likely to be one of small but steady gains for a while.
Fool contributor John Rosevear owns shares of General Motors and Ford. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.