General Motors Corp said on Wednesday its vehicle sales in China would exceed 1 million this year but intense competition would keep the heat on prices in the world's fastest-growing car market.
We believe we are well on our way to going over a million for the first time ever. That is in a market which is now 8.5 million roughly, GM Asia Pacific vice president Nick Reilly told Reuters in an interview.
It is still showing extremely strong growth and we are basically keeping pace with the market.
GM sold 876,747 vehicles last year in China where it is investing about US$1 billion a year and rolling out new models to attract increasingly affluent buyers.
Reilly, who is in Australia in conjunction with a meeting of 21 Asia-Pacific leaders, said stiff competition in China would continue to hurt margins as auto firms were forced to lower prices.
He predicted the price of cars sold across the industry in China would fall 4-5 percent next year, compared with annual falls of about 7 percent at present.
Production capacity in GM's other fast-growing, but smaller, market India was also expected to grow, hitting about 220,000 vehicles a year by the third quarter of 2008 when a second manufacturing plant came on line, Reilly said.
GM did not expect to fill that capacity until at least 2009, he said.
Reilly said GM was looking at production opportunities in Association of Southeast Asian Nation (ASEAN) countries as trade restrictions between those nations eased, but sounded less optimistic on talks to buy a stake in Malaysian state-controlled Proton Holdings.
It has dragged on a bit. We know there are other people interested. We are not getting terribly clear signals as to where it is going, Reilly said.
That (a Proton deal) is a possibility but frankly if that doesn't happen, and we should know relatively soon, we have other plans.
The Malaysia government has been in separate talks with GM and Germany's Volkswagen on selling a stake but no agreement has been reached so far.
GM has also restructured its Australian operations which are expected to return to profit. Overall, GM is tipping domestic Asia Pacific sales of about 1.5 million this year. Including exports, particularly from Korea, that will hit 2.3 million.
Overall, we are generating reasonable profits but we have some plans and investments which mean we have to fund growth, he said.
GM, which been battling stiff competition and a weak U.S. housing market in its home market, is part way through a sweeping restructure that includes slashing more than 34,000 jobs and closing 12 plants in North America.