General Motors has spent five years reviewing its playbook for making money in Latin America and the interior of China. At this moment, it’s show time for the initial results of a project code-named GEM, for Global Emerging Market.
At events this week prior to the Shanghai Auto Show, the American automaker plans to reveal two small SUVs that will be part of a new family of sedans and SUVs, GM forecasts will make up one in five of its worldwide vehicle sales by 2023.
This is just the opening salvo in an almost $5-billion bet by GM to sell up to 2 million technology-laden, modern-looking vehicles yearly to customers who today cannot afford GM vehicles made for the United States, but may someday as their incomes increase.
GM had a hard time for years to crack the code for increasing profitably outside rich markets, in part because vehicles designed for the U.S. or China’s wealthy coastal cities cost a lot for developing world consumers. The company has deserted some Southeast Asian countries and pulled back from Africa as it could not compete.
This time around, GM states, through disciplined cost-control, it has ultimately discovered a way to make affordable vehicles in bulk for developing markets, loaded with the technology that customers want and still make a profit.
The GEM project involved an unmatched level of cooperation with GM’s Chinese joint venture partner SAIC Motor. GM and SAIC shared engineering expenses and worked together on purchasing, GM executives stated.
What potential consumers will see are vehicles that consist of amenities such as touchscreens, mobile phone connectivity, rear-view cameras, and safety functions such as automatic emergency braking and airbags.
What the automaker is counting on them not to notice is that the amount of options is limited, to decrease complexity in buying and manufacturing, or that touches such as fully-carpeted trunks are absent. “We may not be the absolute lowest price point in China,” GM president Mark Reuss informed Reuters at the automaker’s downtown Detroit headquarters. “But we’re going to be right in that sector where this is a pretty good-sized car… (with) a huge value for what you pay for it.”
