GM’s Bankruptcy Lesson: China is Better Than the U.S.

After watching its automotive competitors, including Volkswagen and Ford (NYSE:F), commit to substantial funding in China, General Motors (NYSE:GM) has announced plans to trump them all.

Earlier this week, GM announced plans to invest $11 billion in the world’s most populous nation, specifically in the form of new manufacturing plants, products, and people, Bloomberg said. The money will go to four new assembly plants in China, where GM already is the market leader with over 15 percent share. The company is expected to build 5 million vehicles annually, twice the sales of GM cars in the U.S. last year.

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Experts have compared trending Chinese investment to what Toyota (NYSE:TM) did in America in the last century — investing heavily in the country with the biggest growth potential.

“What GM is doing is really smart because it’s proactively investing in a market that, for the foreseeable future, is going to be the world’s largest,” Rebecca Lindland, an automotive consultant with Rebel Three Media & Consultants, told Bloomberg.

Earlier this month Volkswagen announced plans to double its vehicles sold in China to over 4 million in 2018. The German automotive company is eager to supplant Japan’s Toyota, restricted from the Chinese market thanks to political tensions, as the global sales leader. Additionally, Ford announced it would double its own manufacturing capacity by investing $600 million to produce 1.3 million vehicles annually.

But GM’s level of investment beats them all. The Detroit-based company sold 2.8 million vehicles in the country last year, and the predicted 5 million cars manufactured annually will easily be the most in China.

Could this move help GM fend off Volkswagen and supplant Toyota as the global leader in automotive sales? One thing is for sure: whoever expects to hold onto that top spot in the foreseeable future must first dominate the Chinese market.

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