GM Pushes Forward After Volkswagen Wins China

Volkswagen Badge

Unfortunately, rumors of GM’s (NYSE:GM) fall in China were not greatly exaggerated. Volkswagen (VLKAY.PK) fulfilled analysts’ expectations in claiming the sales crown during a brisk 2013 in China, the world’s largest auto market. Despite the prospect of increased regulations designed to rein in runaway air pollution in the country, both automakers are ramping up investments in China to supply products to a still-growing clientele.

According to Blooomberg, Volkswagen’s overall sales hit 3.27 million vehicles in China in 2013, which bested GM’s total of 3.16 million automobiles. It was the first time GM fell from first place in eight years. The Audi badge was especially productive among VW brands as it posted gains of 21 percent over the company’s 2012 stats. GM’s stars were its Cadillac and Buick brands, which helped the automaker gain 11 percent during 2013 in China.

China’s banner year 

No consumer base has ever bought automobiles on the level of China’s residents in 2013. Auto purchases hit the unprecedented mark of 20 million units and kept barreling forward to nearly 22 million sales by year’s end. To put the number in perspective, the top year of U.S. auto sales had consumers purchasing 17.3 million vehicles in 2000. Every major automaker found reason to celebrate its year in China.

Despite political tensions that continue to haunt Japanese automakers in China, Nissan (NSANY.PK) placed third in vehicle sales while Toyota (NYSE:TM) posted gains of 9 percent in the world’s top auto market. However, Ford’s (NYSE:F) banner year was the most impressive among gainers. Ford sales skyrocketed 49 percent as the company passed Toyota for fifth place overall in China. The increases for world automakers has the top dogs planning major investments in China even as regulations aim to ease the intensity of the nation’s smog.

Pollution controls won’t deter auto investment

China’s industry experts told Bloomberg that increasing emissions regulations and vehicle quotas would hamper the growth of auto sales in 2014 and beyond in China. Nonetheless, the forecast of 10 percent growth of the China market in 2014 — versus 14 percent in 2013 — would be more than enough for foreign automakers to cash in big.

To that end, Volkswagen is pushing forward with its planned $25 billion investment in an effort to double the number of vehicles it produces in China. For its part, GM is pumping $11 billion into expanding its presence in the exploding market. Bloomberg analysts calculate that automobile totals cover only 6 percent of Chinese residents, compared to 80 percent in the United States. Nonetheless, Chinese officials are trying to keep those numbers from growing exponentially.

Vehicles sales quotas are being enforced in numerous cities across China while the government is expected to increase incentives for electric vehicle makers. Bloomberg reports the World Health Organization says the air in some Chinese cities surpasses safety thresholds forty times over. As a result, government officials want air quality to improve by as much as 25 percent in the next four years.

Some of the largest cities in China — including Beijing and Shanghai — now have vehicle quotas in place while municipalities even consider charging automobile owners a congestion tax. China’s traffic jams have reached epic proportions, with an eleven-day pileup during the Olympics acheiving special notoriety.

Until the day comes when auto sales level or drop in the world’s top market, car companies like Volkswagen and GM will continue to strive to be the leader. At stake is the shared goal to top Toyota and become the world’s top selling automaker.

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