What Will it Take to Win in the Chinese Car Market?

China Daily reports that the world’s second-largest economy was the world’s largest car market in 2012. Passenger car sales in China climbed 6.8 percent for the year to 14.68 million units, edging out U.S. car sales of 14.5 million and European car sales of 12.5 million for the same period.

What does this mean for U.S. auto makers?GM chevy equinox

While it’s faded from the headlines, American manufacturers had an insane year for sales in China. Both Ford (NYSE:F) and General Motors (NYSE:GM) wasted no time in capitalizing on a territory dispute between China and Japan that caused sales for Toyota (NYSE:TM) in the country to fall off a cliff.

Toyota’s sales in the region dropped 49 percent in September, 44 percent in October, 22 percent in November, and 15.9 percent in December. This followed about 14.5 percent average growth in the first four months of the year, and nearly double year-on-year sales growth in May before momentum started dying. Earlier in the year, buoyed by its strong performance, Toyota had hoped to set a new sales record in the country.

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As Toyota’s sales plummeted, China’s car market kept expanding, and GM and Ford helped fill the void. Both companies set new monthly sales records nearly every month since September, rounding out what was a relatively strong year at home.

But the growth story for American manufacturers in China doesn’t begin and end with Toyota’s hiccup…

chevy gm voltGM has invested millions in the country, opening up the Advanced Technical Center in Shanghai. The center will be a hot bed for automotive research and development, focusing on electric vehicles.

“China has made electrification a key strategy,” said Jon Lauckner, GM’s chief technology officer. “The ATC’s R&D team is focusing on five key innovation areas: battery cells, lightweight materials, manufacturing processes, engines and transmissions, and developing mobile app for connected urban driving.”

At the end of November, GM also announced that it would be building a third manufacturing base in Chongqing Municipality with its partners SAIC and Wuling Motors. GM’s expansion into China has been clean and competent so far, and its ongoing commitment to developing a strong manufacturing and research base in the country will no doubt pay off in the long run.

Some analysts predict that China’s car market will grow an additional 8 percent in 2013, and some Chinese government officials think that growth will be particularly strong at the start of the year, ahead of the Spring Festival. Rao Da, secretary-general of the China Passenger Car Association, sees as much as 30 percent year-on-year growth in January.

With Toyota still licking its wounds, count on Ford and GM to log some strong numbers this month.

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