GM's China Problem

GM has been a strong performer in the Chinese auto market. But their sales have hit a wall. In 2008, the Chinese automobile market was up 7%, but GM’s automobile sales were down 16%.

GM is losing market share to the usual Japanese suspects, Toyota and Honda, who are aggressively expanding in China. But the company is also losing market share to the more expensive Audi and BMW models.

What is behind this loss of market share? Two reasons seem apparent. First, GM’s problem with potential bankruptcy in the United States has scared away some of the Chinese consumers. But the problem is deeper than that. There is a significant problem in the cars that GM is offering the Chinese consumer.

GM is competing in China with the Buick brand name. Its best seller is a mid-sized sedan called the Excelle. The Buick Excelle is made in Korea. It is also sold in other emerging markets as the Chevrolet Lacetti. Chinese consumers have gradually become aware of the Excelle’s Korean engineering and they don’t think it is as good as American-designed automobiles. In addition, the Japanese in China, as they have in the United States, have set the quality standard with their automobiles. Some Chinese believe GM is not up to that standard.

GM is beginning to slip with the Chinese consumer because of Reliability failures. (See the Perspective, “Failure Shifts More Share Than Success” on StrategyStreet.com.)