Why GM's microvan venture went back to the basics in China's rural market
SHANGHAI -- SAIC-GM-Wuling Automobile Co. this week opened a major assembly plant in the southwest China city of Chongqing.
That's nothing unusual in a growth market such as China. What is more interesting is the company's choice of products. In recent months, Wuling has added two multipurpose vehicles to its lineup -- evidence of its continued focus on China's rural market.
That's a good sign for the company's future.
In China, sedans and SUVs are mainly used in cities. But in rural areas, microvans and MPVs remain in high demand because they can transport goods as well as people.
Microvans are inexpensive, bare-bones vehicles, while MPVs -- which are typically bigger and better equipped -- are an upscale alternative.
General Motors entered the microvan market in 2002 when it formed a three-way joint venture with SAIC Motor Corp. and Wuling.
The partnership subsequently dominated China's microvan market. Flush with success, the venture expanded into the rural market for entry-level sedans -- with mixed results.
In 2010 the partnership created a new brand, Baojun, and it subsequently introduced three car models: the Baojun 630 compact car, the Baojun 610 hatchback and the Lechi small car.
To save money, the partnership borrowed GM platforms. The 630 and 610, for example, are based on the Buick Excelle, while the Lechi is a rebadged Chevrolet Spark.
Sedans are China's largest market segment, but it's a crowded battlefield dominated by international giants such as Volkswagen, Toyota and Hyundai.
In such a market, it is hard for a new brand to compete -- even if one of the joint venture's partners is GM.
As a result, sales of Baojun sedans have been limited. Last month, for example, Baojun's three car models generated sales of only 3,380.
Fortunately, it didn't take long for the joint venture's executives to take another look at the rural market, the segment they know best.
In July the partnership introduced its first MPV, the Baojun 730, which is aimed at rural families. The seven-seater became an instant hit, with monthly sales that exceeded 30,000 in November.
To build on its success, the partnership rolled out a second MPV, the Wuling Zhengcheng, which is aimed at business customers in rural areas.
Like the Baojun 730, the Zhengcheng comes with a choice of 1.5-liter or 1.8-liter engines, and both models have seven- and nine-seat versions.
In the past few years, China's rural regions and small cities have eclipsed major cities as the country's fastest-growing markets. Farmers still earn much less money than town folks, but their incomes are rising more quickly.
In the first six months of this year, per capita disposable incomes in rural China rose 12 percent to 5,396 yuan ($870), according to China's National Bureau of Statistics. Meanwhile, disposable incomes in urban China rose 10 percent to 14,956 yuan.
In the past, Chinese farmers could only afford microvans priced below 50,000 yuan.
But with incomes rising, they want bigger and better products. The Baojun 730 and Wuling Zhengcheng, which sell for roughly 70,000 yuan, appear to be exactly what they need.
With the exception of GM, global automakers have paid little attention to China's rural MPV market. That may prove to be a mistake.
With their two new MPV models, GM, SAIC and Wuling have positioned their partnership to exploit the vast growth potential of China's rural market.
That's a good sign for the company's future.
In China, sedans and SUVs are mainly used in cities. But in rural areas, microvans and MPVs remain in high demand because they can transport goods as well as people.
Microvans are inexpensive, bare-bones vehicles, while MPVs -- which are typically bigger and better equipped -- are an upscale alternative.
General Motors entered the microvan market in 2002 when it formed a three-way joint venture with SAIC Motor Corp. and Wuling.
The partnership subsequently dominated China's microvan market. Flush with success, the venture expanded into the rural market for entry-level sedans -- with mixed results.
In 2010 the partnership created a new brand, Baojun, and it subsequently introduced three car models: the Baojun 630 compact car, the Baojun 610 hatchback and the Lechi small car.
To save money, the partnership borrowed GM platforms. The 630 and 610, for example, are based on the Buick Excelle, while the Lechi is a rebadged Chevrolet Spark.
Sedans are China's largest market segment, but it's a crowded battlefield dominated by international giants such as Volkswagen, Toyota and Hyundai.
In such a market, it is hard for a new brand to compete -- even if one of the joint venture's partners is GM.
As a result, sales of Baojun sedans have been limited. Last month, for example, Baojun's three car models generated sales of only 3,380.
Fortunately, it didn't take long for the joint venture's executives to take another look at the rural market, the segment they know best.
In July the partnership introduced its first MPV, the Baojun 730, which is aimed at rural families. The seven-seater became an instant hit, with monthly sales that exceeded 30,000 in November.
To build on its success, the partnership rolled out a second MPV, the Wuling Zhengcheng, which is aimed at business customers in rural areas.
Like the Baojun 730, the Zhengcheng comes with a choice of 1.5-liter or 1.8-liter engines, and both models have seven- and nine-seat versions.
In the past few years, China's rural regions and small cities have eclipsed major cities as the country's fastest-growing markets. Farmers still earn much less money than town folks, but their incomes are rising more quickly.
In the first six months of this year, per capita disposable incomes in rural China rose 12 percent to 5,396 yuan ($870), according to China's National Bureau of Statistics. Meanwhile, disposable incomes in urban China rose 10 percent to 14,956 yuan.
In the past, Chinese farmers could only afford microvans priced below 50,000 yuan.
But with incomes rising, they want bigger and better products. The Baojun 730 and Wuling Zhengcheng, which sell for roughly 70,000 yuan, appear to be exactly what they need.
With the exception of GM, global automakers have paid little attention to China's rural MPV market. That may prove to be a mistake.
With their two new MPV models, GM, SAIC and Wuling have positioned their partnership to exploit the vast growth potential of China's rural market.
