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Thriving Baojun bodes well for GM's future in China
Yang Jian | 2017/12/15

SHANGHAI -- When General Motors unveiled the entry-level Baojun marque in 2010, few expected it to become GM China¡¯s top-selling brand.

But that became reality last month. With a moderately priced line of crossovers and multipurpose vehicles, Baojun topped Buick in sales last month. Buick sold 112,738 vehicles while Baojun delivered 113,711 units in China in November. 

The latest tally marks a huge transformation for SAIC-GM-Wuling Automobile Co., the joint venture that markets Baojun. Before 2010, the partnership marketed no-frills minibuses that appealed to budget-conscious farmers.

Baojun¡¯s first product was a compact sedan. Seven years later, the brand has only six models. By contrast, Buick markets 11 models in China -- and was still outsold by Baojun.

Baojun is successful because it has never lost its focus on entry-level car buyers. The brand targets customers in rural areas and small cities in China where the main competition is domestic Chinese brands. 

That¡¯s a smart strategy. In recent years, vehicle demand has remained robust in Baojun¡¯s target market even as sales leveled off in China¡¯s prosperous coastal cities. Baojun also gets a boost from its strong brand recognition, which is superior to that of most domestic marques.

All this has helped Baojun maintain robust growth. In the first 11 months, Baojun¡¯s sales jumped 46 percent to 857,700 vehicles.

Now that Baojun is thriving, it has been given a new goal: Help GM expand into China¡¯s EV market to meet Beijing¡¯s production quotas. In 2019, the government will introduce a California-style carbon credit trading program to goad automakers to ramp up output of EVs and help curb emissions and pollution.

In response, Volkswagen and Ford each have formed new joint ventures with Chinese EV makers to build small, affordable EVs. GM doesn¡¯t have to do this, because Baojun has access to an entry-level market that Ford and VW have never tapped.

In July, GM-Wuling launched sales of its first all-electric model, the Baojun E100. It has been a solid launch and November sales topped 1,900 units.

To be sure, Baojun doesn¡¯t boast the profit margins of Buick or Cadillac. Starting prices are below 70,000 yuan ($10,600), but manufacturing costs are modest, too, so Baojun is a money maker.

In the first six months of 2017, SAIC-GM-Wuling recorded a net profit of 4.1 billion yuan. GM, with a 44 percent stake in the joint venture, was entitled to 1.8 billion yuan of the profit. 

It¡¯s a small amount for GM, whose global net profit in the period approached $4.3 billion (28.4 billion yuan). But it¡¯s a good deal better than break-even, and it bodes well for Baojun¡¯s entry in China¡¯s fast-growing EV market.

As long as GM expands Baojun with the right products, the brand¡¯s sales and profits will grow accordingly.

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