By Kalea Hall
DETROIT, Aug 4 (Reuters) – General Motors said on Tuesday it had renewed its joint-venture agreement with China’s SAIC Motor for 20 years after a lengthy restructuring in the Chinese market that included plant closures and the elimination of some models.
The extended 50-50 joint venture between the automakers will result in more vehicle-development work being done in the world’s largest auto market to appeal to local tastes.
GM said the company would focus on its Cadillac and Buick brands in China, where it would discontinue sales of its Chevrolet brand.
The terms also will allow GM to use China as an export hub to ship Buicks and Cadillacs to the Middle East, Africa, South America, Mexico and elsewhere in Asia, the Detroit automaker said.
The joint-venture renewal will allow “local innovation to be shared globally,” Shanghai government-owned SAIC said in a statement.
GM was one of the first global automakers to enter China when it won a coveted partnership with SAIC in 1997 and grew to become one of the country’s top-selling carmakers.
But like many global car companies, GM has seen its sales in China crater over the past decade, as domestic automakers have grown more sophisticated and the market has moved sharply to electric vehicles.
GM sold 1.9 million vehicles in China last year, down 51% from 2016. Its Chevy brand suffered as other lower-cost competitors took market share.
GM will continue to build Chevrolets and export them from China through a separate joint venture it has with SAIC and Wuling.
SAIC-GM, which has delivered more than 20 million vehicles over nearly three decades, will now compete with a portfolio of locally developed products, the company said.
The joint venture last year launched the Buick Electra sub-brand of electric and hybrid vehicles, which was developed in China.
The Electra E7 SUV had more than 10,000 sales in its first month on the market. It will be the first premium model that the joint-venture company will sell overseas, starting in October.
The joint-venture automaker has no plans to export to the United States, GM said. Tariffs and national security policies aimed at China-developed technology have kept Chinese automakers out of the U.S. market.
SAIC-GM plans to launch at least 30 electric or hybrid vehicles by 2030.
GM in 2024 began restructuring its China business amid steep market-share losses. The automaker recorded two non-cash charges totaling more than $5 billion on its joint venture in China.
GM earlier this decade began losing money in China after having once logged around $2 billion in annual profits. Since the restructuring, GM has posted several consecutive quarters of profit, most recently notching $83 million in second-quarter income.
GM’s renewal commitment to the China operation via the partnership with SAIC underscored the challenges for the U.S. automaker to entirely wean itself from reliance on China for revenue, low-cost manufacturing and technology know-how even as geopolitical tensions persist.
GM had directed several thousand of its suppliers to scrub their supply chains of parts from China, reflecting concerns over potential geopolitical disruptions to its operations, Reuters reported in November.
The joint-venture renewal follows a trend among automakers, including Honda Motor Co and Volkswagen AG, to renew partnerships with Chinese firms despite their significant losses in market share and profits in China.
(Reporting by Kalea Hall in Detroit; Additional reporting by Zhang Yan in Shanghai and Qiaoyi Li in Beijing; Editing by Mike Colias, Jamie Freed and Stephen Coates)
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