SHANGHAI -- With the Chevrolet Malibu sedan and Captiva SUV slated to debut at the Shanghai auto show, General Motors has made it clear that it wants to move the brand upscale in China.
It's a timely strategy, since the brand is losing steam. After surging 66 percent in 2010, Chevy sales in March rose only 7 percent year-on-year. By contrast, Buick and Cadillac sales continue to soar.
But it won't be so easy for Chevrolet to move upscale. GM will have to make a serious -- and costly -- investment to expand production capacity.
Chevy's Chinese model lineup -- Spark, New Sail, Lova, Aveo, Epica and Cruze -- are mostly low-priced. The Spark costs only 43,000 yuan ($6,500), while the New Sail is priced at 60,000 yuan.
As a result, Chinese consumers see Chevy as a discount brand. So it makes sense for GM to introduce the Malibu and the Captiva in China, which would move Chevrolet into higher price segments. But GM will have to invest a lot of time and energy to market these two new models. A mainstream model in the United States, Malibu is virtually unknown to Chinese consumers.
Moreover, the Malibu and Captiva have formidable rivals. In the mid-sized sedan segment, competitors include the Toyota Crown and Camry, the Honda Accord and the Volkswagen Passat.
The Captiva's rivals include popular SUVs such as the Honda CR-V, Toyota RAV4 and Toyota Highlander.
To compete against these formidable rivals, GM will have to produce the Malibu and Captiva in China. Given China's high tariffs, it simply doesn't make sense to import these vehicles.
I wouldn't be surprised if GM makes some announcements about future production plans during the Shanghai auto show.