DAVID SEDGWICK

Don't sneer at Wuling's microvans -- they should count as GM sales

David Sedgwick is a Senior Writer for Automotive News and Editor of Automotive News ChinaDavid Sedgwick is a Senior Writer for Automotive News and Editor of Automotive News China
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So which company is the world's largest automaker -- Volkswagen or General Motors?

A deceptively simple question. Two weeks ago, GM announced that it had sold 9.03 million vehicles in 2011, while Volkswagen says it sold 8.16 million units.

So GM is the winner? Not so fast. VW notes that its commercial truck subsidiaries, MAN and Scania AB, also sold a couple of hundred thousand heavy trucks.

The tally is also muddled by how you count sales from joint ventures, who controls the joint venture, and what type of vehicles are produced by the partners.

Some of GM's rivals note that the automaker's global sales included 1.2 million vehicles produced by one of its Chinese joint ventures, SAIC-GM-Wuling.

In China, Wuling's microvans sell for less than $4,500. These inexpensive vehicles are ubiquitous on China's rural roads. Last year, the Wuling Sunshine was China's best-selling light vehicle, with sales of about 573,000 units, according to GM.

In fact, the four top-selling models in China are all commercial microvans, according to LMC Automotive. Why, exactly, are we supposed to ignore such an important market segment? Because these vehicles are cheap?

Or is that GM has a minority stake of 44 percent in the Wuling joint venture? (SAIC Motors holds a 50.1 percent stake, while the municipality of Liuzhou, where the company is headquartered, holds 5.9 percent.)

GM bought into this venture in 2001. At the time, the company's assembly plant in the south China city of Wuling was a manufacturing relic, with dorms for the workers and a coal plant for power.

The company had phased out tractor production, but it had no money to pay for a redesign of its microvan, which was based on a 15-year-old Mitsubishi vehicle.

GM brought in professional managers, and it built a new engine plant for its joint venture. But GM did not automate Wuling's vehicle assembly line. That allowed the partnership to hold down production costs. As a result, the company's microvans cost about as much as they did a decade ago.

Wuling is growing. When GM invested in the company, Wuling sold about 100,000 vans per year.

Now, annual sales have topped 1.2 million units, and the venture is exporting vehicles to South America and Asia. This year, Wuling vehicles will go on sale in India, which ought to be a promising market.

The venture also has successfully launched its new Baojun line of passenger cars for the entry-level market.

As one might expect, Wuling doesn't enjoy fat profit margins in this price-sensitive segment. According to J.D. Power, the partnership generates an average profit of 2,000 yuan ($320) per vehicle.

But this isn't a debate about profits -- it's a debate about sales volume. In China, General Motors has successfully positioned Buick as a premium brand, Chevrolet as a mass-market brand and Wuling as an entry-level brand.

This strategy seems to be working for GM. Let's count those microvans.

You can reach David Sedgwick at dsedgwick@crain.com.

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