China used to be the next big thing for the Big Three. Now it is South America. GM (GM) is saying that it can grow it Latin America and African revenue by several billion a year over the next few years. According to Reuters, the company’s sales in those regions has gone from $5.4 billion in 2003 to $15 billion last year. GM actually plans to increase manufacturing, especially in Latin America.
Over at Ford (F), demand in South America is so strong that the company is thinking about exporting cars from its North American plants into the region. That is the first good news Ford plant managers and workers in the US have heard for some time. The company told Reuters that "South America’s auto market was growing fast, especially in Brazil and Argentina, but the automaker’s future market share growth there may be constrained by lack of capacity."
Ford’s South American market share has grown to 12 percent this year from 8.4 percent in 2000.
All of this is unexpected. At least among most investor. India and China were to be the next markets that would drive growth for the US car companies. But competition in China is so fierce that GM has just announced that it will offer zero percent financing on models that it makes with its JV venture in Shanghai. According to The Wall Street Journal "In the first six months of the year, sales growth of GM brands in China lagged far behind the overall sales increase for passenger vehicles. Sales of Buicks, Chevrolets, Cadillacs and other GM cars made by Shanghai GM were up 12%, while car sales overall grew 26%."
GM cannot afford that kind of fall-off in China. Unless it sells the cars in South America.
Douglas A. McIntyre
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