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GM Opens New Plant in China

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General Motors Company (GM - Free Report) announced that its SAIC-GM-Wuling joint venture in China has opened its second plant in southwestern Guangxi province for manufacturing the “only-in-China” brand Baojun.

The joint venture has invested 8 billion yuan ($1.3 billion) in the facility, which will be capable of producing 400,000 vehicles annually. It will also open a powertrain plant at the facility in September 2013 that will produce up to 400,000 engines per year.

The joint venture plans to roll out Baojun 630 midsize sedans from the plant, which has a price tag of 63,000 yuan ($10,100). The other “only-in-China” brand Le Chi mini car sells for about 40,000 yuan ($6,400) in the country.

Many U.S. automakers have been gearing up to tap the world's largest auto market. Last year, GM occupied 10% of the Chinese market, lagging Volkswagen AG’s (VLKAY - Free Report) market share of 18%, according to U.K.-based automotive think tank LMC Automotive.

Recently, Ford Motor Co. (F - Free Report) broke ground for two new plants in China as part of its major expansion plan to boost sales in the country. The company announced plans to invest $600 million and $760 million in its two new assembly plants, located in the southwestern city of Chongqing and in Hangzhou, respectively.

Auto sales in China had grown at a double-digit pace since 1999, except in 2008 when the global economic crisis crept in. In 2009, China overtook the U.S. as the biggest auto market in the world by sales volumes when the Beijing government introduced a stimulus package, including tax incentives for small cars with engine sizes of 1.6 litres or smaller.

However, the incentives were scrapped last year and the Beijing government imposed quotas on new car registrations in order to control the traffic congestions. As a result, new car deliveries plummeted 56% to 403,500 units in 2011.

Nevertheless, China’s automotive industry outlook is promising in 2012. According to CAAM, passenger car sales in 2012 is expected to grow by 9% in the country, which is much higher than 2011 (2.5%).

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