Manufacturing News

GM to spend $5 billion on new vehicles for emerging markets

General Motors plans to spend $5 billion over the next several years to develop a new range of technology-rich Chevrolet small cars, based on a common architecture, that will be built and sold in China and other emerging markets.

GM, which is co-developing the architecture and engines with Chinese partner SAIC Motor Corp., aims to have the first of the cars in production by 2019, said company President Dan Ammann.

The new family of cars are expected to generate global sales of more than two million units a year.

Through the effort, GM hopes to leverage its scale and leap ahead of competitors in markets that are expected to generate much of the global growth in automobile sales over the next 15 years.

"We are making clear where we see growth opportunities and where we are placing our bets," Ammann said. "We are making an investment in the future of the company."

The program also reflects a shift in how automakers are approaching emerging markets, where consumers and regulators are quickly demanding more advanced technology in vehicles.

In the past, Western automakers typically served these markets with very low-cost, bare-bones cars, or produced stripped-down versions of vehicles that had reached the end of their product lives in mature markets.

Ammann said GM believes neither approach will work in the future. "We believe customer requirements are moving very rapidly in these markets," Ammann said.

Consumers in emerging markets "want to have connectivity, good fuel economy, the right levels of safety [technology]. In order to provide the feature and content level, we need to come at this from a different way and from a different level of scale."

Ammann also said GM believes economies of scale will allow it to produce and sell content-rich cars at affordable prices while generating "the right kind of returns" for the company.

The new architecture GM plans to develop will replace several lines of unrelated vehicles now sold overseas. However, Ammann declined to specify which current models would be affected.

He said the result would be a "significant consolidation" of platforms and would align with GM's broader effort to produce nearly all vehicles from just four vehicle sets by 2025. The company currently derives about 75 percent of its models from 14 core architectures.

The new small cars will be produced in existing plants that will be retooled for the new, low-cost architecture, and will include a range of body styles. Ammann declined to offer further details but said GM has no plans to sell any of them in the United States or Europe.

In addition to GM's $5 billion investment, SAIC will spend an unspecified sum on the project. The project represents a deepening of GM's ties to SAIC. It will be the first time first time the two companies have developed a platform together.

Analysts expect global production to climb to more than 130 million light vehicles by 2030, up from 90 million last year. Nearly all of the growth will come from emerging markets. China alone is estimated to grow to about 40 million vehicles by 2030.

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