GM, Ford Lead Automakers Counting on China Growth

Lately among all the other signs of a slowdown in the global economy, analysts have pointed to cooling of auto sales in China as a very salient note of trouble.

So it's more than the usual good news that GM posted record sales in China in May (up 23 percent) and that Ford (up 8 percent in China last month) remains so bullish on the Chinese market that it is considering going to the trouble of creating the indigenous brands that are favored by the Chinese government.

"We are studying indigenous brands," David Schoch, chairman and CEO of Ford's China operations, told Reuters. Although he stressed that "our total focus in terms of brand enhancement is really on the Ford brand."

China's auto market is so closely watched because it has been the fastest-growing in the world in recent years, it has become the globe's largest national market, and just about every western auto brand has been ramping up investments there, as well as new and expanding native brands, often in joint ventures with U.S., European or Japanese car makers.

But car sales in 2011 rose only by 5.2 percent in China as the government removed incentives for purchase of small cars, which especially had favored indigenous brands. And the consensus forecast is that China sales would slow further this year, to about 5 percent for all of 2012.

Schoch noted "that is still fairly rapid growth," and Ford believes its own sales will out-strip that rate. Still, over the longer term, Ford needs to play catch-up in China with GM and Volkswagen. And the Chinese government has made things tougher for brands that have the furthest to go in establishing the kind of presence they want in China, with new rules that favor link-ups with Chinese companies and brands.

GM said that it was one such venture, with Shanghai Automotive Industry Corp., that was mainly responsible for its 21-percent jump in May sales from a year earlier. The venture sells microvans. Chevrolet sedans also sold well. Meanwhile, sales of GM's wholly owned Cadillac brand eased off by 2 percent in May from a year ago.

BMW and Volkswagen's Audi brand posted big sales increases in May, 32 percent and 44 percent respectively.

The Chinese government is said to be considering some new stimulus measures for auto sales, including pushing down fuel prices. Given the travails of European consumers and the erratic nature of the U.S. economic recovery, jump-starting robust growth again in China may become even more important to western brands.

[images via GM China & Ford China]