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GM Receives Regulatory Approval for 300,000-Unit Plant in China's Hubei Province

Published: 2/13/2012
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GM's passenger vehicle production joint venture in China has won approval for a new 300,000-unit, USD1.1-billion plant in Central China.



IHS Global Insight Perspective

 

Significance

Shanghai General Motors (SGM) has won approval from the regulatory departments in Central China's Hubei Province to build a new passenger vehicle plant there, giving the automaker further access to China's central and western regions which are poised for the strongest growth.

Implications

SGM is currently running at full capacity in China, and has expansion projects on the go across its Chinese facilities in Shenyang (Liaoning province) and Yantai (Shandong province).

Outlook

GM CEO Dan Akerson said recently that GM aims to increase production in China by 760,000 units as it expands into interior China under the government's "Go West" strategy.

General Motors' (GM's) passenger vehicle production joint venture (JV) in China, Shanghai GM (SGM), is running at or above full capacity having sold over 1.2 million units in China in 2011, rising 18.5% year-on-year (y/y; see China: 6 January 2012: Shanghai GM Sells 1.2 Mil. Units in China During 2011, Up 18.5%). According to a report released by the provincial government of Central China's Hubei province, SGM has won approval for a new 300,000-unit plant in the city of Wuhan. Reuters reports that the plant will cost USD1.1 billion. As well as the new plant, in 2011 it received approval for expansion at its Liaonning facility (see China: 30 June 2011: Shanghai General Motors Wins Approval for Expansion of Liaoning Facility). IHS Automotive's production forecast data show that the automaker has been running three shifts of seven hours per day at some plants while others have two shifts of eight hours per day—above the planned capacity for the plants. As the new expansions and plants come into play, production at the existing facilities will return to normal.

Earlier this year, GM's CEO Dan Akerson was quoted as saying that the automaker was looking to expand production in China by 760,000 units (see China: 17 January 2012: GM Plans More Plants in China). This is understood to refer to SGM, which currently has four plants in China, of which two are undergoing significant expansion projects.

"Currently, Shanghai GM has four vehicle manufacturing plants at three locations: Shanghai GM – Jinqiao in Shanghai, Shanghai GM Dong Yue Motors in Yantai, and Shanghai GM (Shenyang) Norsom Motors in Shenyang. Shanghai GM (Shenyang) Norsom Motors' Phase III project and Shanghai GM Dong Yue Motors' Phase III project are under construction. Shanghai GM will continue to increase operating efficiency at all plants to guarantee production capacity keeps up with growing demand," says spokesperson Irene Shen, in a email sent to IHS Automotive.

The two expansion projects at Shenyang and Yantai are expected to increase production by 540,000 units by 2014. The plant in Yantai is currently undergoing a 300,000-unit expansion costing approximately CNY7 billion, while the plant in Shenyang is undergoing a 240,000-unit expansion.

The additional capacity is expected to come from the new plant. There have been rumours circulating that SGM wanted to open a plant in western China, and Hubei province is well placed to give access to penetrate into China's interior and western regions which are poised to see faster growth rates. SGM's current plants are based around the eastern coastline of China.

Outlook and Implications

In 2014, expansions at the Shenyang and Yantai plants will have concluded and the plants will be able to produce almost double their current capacity. Under the current production schedules the plant in Shenyang produces around 300,000 units per year while the plant in Yantai produces just over 300,000 units per year. In 2014, the Shenyang plant will produce over 400,000 units while the Yantai plant will produce over 500,000 units. In response to questions from IHS Automotive, GM said: "Based on the 2015 strategic plan, Shanghai GM will make sustainable plans regarding the further expansion of its production capacity in line with the changing market and growing demand in China." The new plant in Wuhan city will start production in 2014, thereby meeting SGM's strategic plans for production expansion by 2015 in China.

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