GM Could Use Wuling to Compete with Tata Nano - VIDEO ENHANCED

EDITOR'S NOTE: This page contains 2 videos that provide background on this story.

Shanghai - May 4, 2008: US auto giant General Motors is likely to up its stake in its Chinese venture SAIC-GM-Wuling Automobile Co (SGMW). The growing interest in the joint venture is the result of GM's strategy to make cheap small cars to compete with the recently displayed under-$2,500 Tata Nano.

Wuling is an integral part of GM's overall growth strategy in China, in terms of both product development and sales. The American auto giant is satisfied with its stake in the joint venture and the relationship with the two partners in China. GM holds a minority share in its mini-vehicle Chinese-owned SGMW.

AS one of the cheapest GM-badged nameplates offered anywhere, the current low-cost minivan Chevrolet Spark or Chevy Spark (sharing the "design" inspiration with the Chery QQ) produced by SGMW sells for 39,800 yuan ($5,680) in China right now, and engineers at the GM joint venture in southwest China have been tasked with cutting production costs of the next generation model by half. That car, built on the same Global minicar platform, is expected to debut in late 2009.

Click PLAY to watch a video of the GM-Wuling presentation at the 2008 Beijing Auto Show

GM is more focused on taking costs out of the Spark, a car smaller than the Chevrolet Aveo. The Wuling-made Spark uses a mix of foreign and local suppliers. Engine production offers the most potential for cost reductions. Currently, GM imports 0.8L and 1.0L engines from Korea for the Spark in China. This year, it will switch to locally produced 1.2L engines designed by GM.

Another remarkable mini-car model is the tiny Xingwang, the smallest, cheapest offering from SGMW. Here's how the Chinese minivan stacks up against India's Tata Nano sedan. The Xingwang minivan is the cheapest Wuling brand model produced by the joint venture. It starts at about 26,800 yuan. It remains to be seen whether this model will carry the GM brand to join the future GM minvan lineup.

Click PLAY to watch Tata Motor's unveiling of the Nano at last January's AutoIndia Exposition

For the low price of Xingwang, you get a tiny, seven-seat van with a 0.8L engine and four-speed manual transmission that meets Euro 2 emissions standards. Forget about air conditioning. Seat belts are offered only on the front seats. The engine is produced by a local supplier and costs $970. The transmission produced by a local company, costs about $171.

Those models offer hope that GM's ventures in China can produce cars with dramatically lower prices. But they also illustrate that producing a car as cheap as the Tata Nano will be tough anyplace but India, where the laborforce costs are even lower that those in China.

SAIC-GM-Wuling, established in 2002, is a partnership involving GM, Shanghai Automotive Industry Corp (SAIC) and Liuzhou Wuling Automotive Co. GM owns 34% of the company, SAIC 51% and Wuling 15%. The venture produces minivans and other small commercial vehicles under the Wuling brand. The Chevy Spark is the only GM nameplate the venture produces.

SAIC-GM-Wuling also is China's largest minivan manufacturer. In 2007, it sold 548,945 units. Only 32,510 were Chevrolet Sparks.