GM to battle VW in China with $12b investment and new plants

BEIJING, Apr 21(Reuters) : US car giant General Motors Corp (GM)  plans to invest $12 billion in China from 2014 to 2017 and build more plants next year as it competes with aggressive rivals in the world's largest auto market.
GM expects its China sales to expand 8-10 per cent this year, in line with the overall growth of the Chinese market, where foreign firms, such as Volkswagen AG, and domestic players like SAIC Motor Corp  vie for more market share.
"We are investing wisely and accelerating our vehicle development and manufacturing to keep pace with market demand. In total we are investing $12 billion between 2014 and 2017," Matt Tsien, president of GM China, said at the Auto China show in Beijing.
GM plans to build five more plants in China next year, as part of its efforts to ramp up manufacturing capacity there by 65 per cent by 2020, executives said on Sunday.
Rival Volkswagen's  early entry into China focused on rapidly-developing eastern provinces - now it plans to push into the west.
VW's luxury division Audi which will target smaller megacities in central and western provinces to raise the number of dealerships by about half to 500 in the next three years, chief executive Rupert Stadler told Reuters.
"That's where new business is emerging, where things get rolling," Stadler said at the Beijing show. "We don't need more dealers in Beijing and Shanghai."
China's auto market is set to expand 8-10 per cent this year, slightly slowing from 2013 when it sold 21.98 million vehicles, up 13.9 per cent from a year earlier.
Vehicle density in China's smaller cities offer lucrative growth prospects.
The average number of cars per 1,000 inhabitants in Yaan, a city of about 2 million population in central Sichuan province is 18, compared with 123 in first-tier coastal cities Shanghai and Guangzhou, according to VW's website.
Parent VW was one of the first global automakers to launch production in China during the 1980s, is evolving its operations in the country by pushing west.
"A large sales potential for passenger cars will develop there fairly quickly," Jochem Heizmann, head of VW's China operations told reporters. "That's one factor driving growth besides state-induced urbanization."
VW, which last year opened factories in the western cities Chengdu and Urumqi, is counting on double-digit market growth to increase group deliveries to over 3.5 million this year, a record, from 3.27 million in 2013, CEO Martin Winterkorn said.
China's auto market rose 13.9 per cent to 21.98 million vehicles last year, compared with a 7.6 per cent gain in the United States to 15.6 million.
Wolfsburg-based VW, having eclipsed General Motors  last year as the top-selling foreign brand in China, aims to consolidate its lead with aggressive spending.
Its two joint venture partners, First Automotive Works  and Shanghai Volkswagen, are planning to spend 18.2 billion euros through 2018, the year VW has pledged to take the global car-sales crown, on models, technologies and plants.
GM's five new Chinese plants will be in Wuhan, Chongqing, Jinqiao and Shenyang. Four of those will be vehicle assembly plants, while the fifth one will be an engine plant in Shenyang.