Dan Ammann Remarks GM China Press Conference Theme: “GM & China: Full Speed Ahead”
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Dan Ammann Remarks GM China Press Conference Theme: “GM & China: Full Speed Ahead” Spoken work takes precedent Beijing Auto Show April 20, 2014 Thank you. It is a pleasure to be with you. This is the first time I have had the opportunity to attend Auto China. I was very impressed. It truly lives up to its reputation as one of the world's great auto shows. I was equally impressed by our joint ventures' displays. They demonstrate to the people of China that GM is moving full speed ahead in this country. One of my major responsibilities as president of GM is overseeing our global regional operations, which includes China. China is one of the most important markets to our company and one of the fastest growing. We are proud of our phenomenal growth in this country, our entire leadership team are very committed to our operations here. In addition to the outstanding leadership team we have working in China, GM's other senior leaders visit China regularly to ensure they understand the market and are able to provide their support to our partners, the GM team and our joint ventures. I personally will be visiting China often in my new role as chairman of the SGM Board. I am honored to step into that position and look forward to working with our distinguished partners to help steer our future success. China has been our company's largest market since 2010, and we expect it to remain our largest market well into the future. Last year, China accounted for about one third of GM's worldwide sales - reaching more than 3 million units for the first time ever. Just last week, we reached 1 million sales for the 8th time in our history in China and it was the earliest we ever hit that mark in a calendar year. We do not see GM's sales or the China market as a whole slowing down any time soon. And we are counting on China for another record year in 2014, and I'm confident we can make it with the strong new models we're introducing- like the Chevrolet Trax and new Cruze, Cadillac CTS and Baojun 610 and 730, which made their debut here in Beijing. Despite the moderation from the record growth of recent years, by 2020 we expect total domestic vehicle demand to be in the range of 33 to 35 million units. To put this number in perspective, that's more than the total number of vehicles sold in the entire world in 1971. 33 million is also about twice the size that we expect the U.S. market to be in 2020. So where are we focusing our efforts in China to conquer those challenges and stay at the front of the pack? First, we will keep making the most of our strong partnerships and joint ventures. It remains critical to leverage the local market knowledge and execution capabilities of our partners and JVs in key areas of the business - from vehicle development to manufacturing to telematics. Second, we are building plants to keep pace with market demand. In China we not only build vehicles for the domestic market, but produce local vehicles for export to emerging global markets under the Chevrolet brand. Third, we will continue to ensure that we have the right products in the right segments so we're ready when shifts in demand occur. One thing buyers in every market want are highly fuel efficient vehicles - and we are exploring a range of options there as well. In short, everything we do is focused around moving fast so we can develop and deliver the right products to our customers, because our customers are the center of everything that we do. Now let's look at what we are doing to make sure the vehicles we offer meet the needs of people across China. With more than 100 automotive brands to choose from, we must continue to predict and lead market trends if we want to stand out in the cluttered marketplace. No doubt, China is one of the most diverse auto markets in the world - it's a market of many markets. Buyers in Tier 1 and 2 cities have different needs than those in Tier 3 and 4 cities. For example, there is obviously higher interest in luxury vehicles among consumers in Tier 1 cities, who tend to have more disposable income and whose tastes are becoming more global as they are travelling, studying or working overseas. In comparison, those in Tier 3 or 4 markets are more likely to be buying their first vehicle and want something more affordable - maybe a vehicle they can use for business as well as for personal use. Regardless of where they live, we want to appeal to all consumers, and are introducing more new models to meet their diverse appetites. I would also like to assure you that the voices of Chinese consumers are given careful consideration when we develop global vehicles like the Cadillac CTS, Chevrolet Cruze and Trax, regardless of where in the world they are designed and engineered. GM has analysts in every region whose job it is to watch market trends and listen to consumers to see what they want now and in the future. Now let's look at a few of the emerging trends we are watching and acting on. Our major trend is the growing interest in larger and more expensive vehicles. We know that many Chinese consumers, especially those in urban areas, have higher incomes and are eager to spend their money on luxury products - including cars. You've all heard that luxury vehicles will help drive the growth of the industry here, making up at least 10% of auto sales by 2020 - and surpassing U.S. luxury sales in the next 2 years. China's luxury buyers also have many choices, with about 20 luxury brands vying for their attention. It's also true that Cadillac is one of the newer luxury brands in China and that we have some tough competition in this space. We are confident that we have a strong global portfolio with Cadillac and more in the pipeline to help us gain ground. SUVs are another hot segment, and forecasts predict that the market for them alone will reach 7M by 2020 - triple what it is today. Last year more than 60% of people who bought their first car chose an SUV. Matt will explain more about our SUV strategy to satisfy that demand in a moment. We also plan to boost our offerings in other hot areas like MPVs. China's MPV sales will double to nearly 3M units by 2020, compared with about 1.4M last year. The Baojun 730 we revealed today is an affordable 7-seat family vehicle right in the heart of that category. We also expect that compact sedans will retain the largest share of the auto market. Last year that segment made up one third of passenger vehicle sales. By 2020 we expect it will still be the most popular segment, with about 10M annual sales. GM offers the Chevrolet Cruze, Buick Excelle family and Baojun 630 compact entries. We have plans for more entries in this "corner stone" segment. If you continue to follow General Motors and our joint ventures in the coming years you will see we will bring more new models to the market and faster than ever before. One way we will do so is by continuing to leverage our global portfolio of attractive, fuel-efficient and fun-to-drive models developed for markets all around the world. The final area I'd like to discuss is the increasing demand for vehicles in the central and western regions of the country. Since our return to doing business in China in the 1990s, GM has worked hard to build a value chain that covers not just the coastal region but the entire country. This is consistent with the Chinese government's "Go West" development strategy and the NDRC's encouragement of investment in central and western China. As an industry leader, we are proud to be doing our part. In the next few years, General Motors and our JV partners will significantly increase our presence in these areas. Central and western China represent about 45% of GM's domestic sales today, so these inner provinces are indeed an engine of growth. We are expanding both our dealer network and manufacturing footprint to make it more convenient for customers in these markets to buy and service General Motors vehicles. By 2017 SGM will have an additional 700 dealers in central and western China selling Chevrolet and Buick models, for a total of 1,700 outlets. SGMW will also add another 700 dealerships selling Wuling and Baojun models, for a total of 3,200 stores. We will respond to this blossoming demand with new assembly plants, parts distribution centers, telematics calling centers and components suppliers. Matt will talk about our manufacturing expansion plan, which includes two new plants in the western region in Chongqing and Wuhan. China is an incredibly dynamic market that's changing rapidly -- and we are moving full speed ahead to keep up with it. One thing that will not change between now and 2020 is GM's commitment to China. We are very fortunate to have Matt leading our China operations. Few people have Matt's global engineering expertise combined with his extensive knowledge of the China market. Matt will drive our aggressive growth plans in China.