U.S. China BRIC Auto Market Should GM

U.S. China

BRIC Auto Market

Should GM Invest in China?

The world has been moving away from the Western dominance that has held it for the past several centuries for the past few decades. As the world's largest populations grow economies to match, the United States and other G6 nations will dwindle in influence. This means that companies need to invest heavily in the BRIC nations if they are to compete globally in the near future. The given question is whether General Motors (GM) should invest heavily in China as that nation's population begins to have more individual economic means, or another of the BRIC nations (Brazil, Russia, India, China) due to more rapid growth. This essay will examine the question and determine an answer from the research.

In a report completed for Goldman Sachs investment company, Wilson and Purushothaman (2003) estimated that China would pass all of the G6 nations except the U.S. By 2015. The other BRIC nations are on pace to do the same, but it will not happen for more than two decades after that even for India. Because China already has a fast growing economy and a plan to continue that growth, they are in the best position to equal or better the G6 in a short period of time.

With the growth of the nation's economy comes consumer need for more adequate transportation. China is already the largest consumer of automobiles among the four BRIC nations, but that need will only continue to grow. By 2014 the BRIC nations will consume 30% of the world's autos (Lang, et al., 2010) and China alone will account for more than 50% of that market (Wilson & Purushothaman, 2003). It is estimated that between 2009 and 2014 the BRIC nations will see growth in their auto consumption of up to 15% per year, whereas the G6 nation's consumption will only rise at a 2% clip (Lang, et al., 2010). Again, China will account for the vast majority of this growth (Lang, et al., 2010).

GM has regained the title of world's largest automaker from Toyota again, and if the company wishes to maintain that title it will have to invest heavily in emerging markets. Since the G6 nations are stagnating as far as automobile consumption is concerned, it is necessary to look at the next group of nations that will take their place in the global marketplace. At present, China's economy is growing at a much faster rate than the other BRIC nations and should thus be the focus of any planned expansion into these markets. Because China is already a consumer of GM goods, name recognition is not a problem and distribution should be relatively simple also. For GM to expand at a greater rate into the Chinese market before it takes more drastic measures makes sense also as China can be used as a test market for the others. Over the next two decades as the economies of the other BRIC nations grow, GM can implement similar plans of expansion into each of them.