SHANGHAI -- General Motors expects to post double-digit growth in China in the next few years as blistering demand puts the country on track to become GM's second largest market.
With sales growth of almost 50 percent in 2003, GM expected another boom year in China, CFO John Devine said, while acknowledging that spiralling steel prices would have to be factored in.
"The business continues to be very strong. The issue we're wrestling with in China is how to keep up with demand," Devine said on his first visit to the country since taking up his position at GM in 2001.
Devine said China was on course to overtake Japan as GM's second largest market but he did not give a timeframe.
GM posted a 46.4 percent rise in China sales in 2003 from its four main auto-making ventures to 386,710 units.
The company does not give a profit figure for the country.
Foreign car makers have injected billions of dollars into China, chasing sky-rocketing demand from consumers as more mature markets stagnate, prompting fears of a margin-sapping glut.
Runaway investment in production capacity is also sparking fears it could outpace demand growth.
But of more concern was the global rise in steel prices, though overall material costs would fall in 2004, Devine said.
"It's something we're going to have to absorb," said the executive, who was Ford Motor Co's CFO before starting at GM.
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A lack of significant auto exports from China to the United States meant GM was not concerned with the debate on whether the yuan should be revalued, he said.
Devine insisted price cuts that have been sweeping the Chinese market have not had a significant impact on margins.
"It's made cars more affordable and that's a real plus for the market," he said. "Profits have been very good."
GM executives estimate they had 8.7 percent of the Chinese market in 2003, up from 7.4 percent in 2002. But this still lags far behind market leader Volkswagen AG, which held 33 percent of the market in 2003.
GM had said in November it would increase capacity at its Chinese plants by 50 percent by 2006, tacking on production lines at its Shanghai plant and another in the southern region of Guangxi.
Shanghai GM only had 4,000 units in inventory at the end of last year, on sales of slightly more than 200,000, said GM's China head, Phil Murtaugh.
The company also has a troubled venture in the northeastern city of Shenyang, China, called Jinbei GM, the smallest of its China partnerships, with annual capacity of about 30,000 trucks and SUVs.
That venture sold just 3,200 vehicles last year.
"We're working on some solutions to Jinbei," Devine said, adding Shanghai Automotive Industry Corp, GM's main Chinese partner and China's No. 2 automaker, was involved.
Shanghai Auto has said it was considering taking over the Liaoning provincial government's stake in Jinbei GM.
Executives declined further comment on the Jinbei plant.