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CNBC ON DIGG

China Growth Shows GM Good Fortune

Published: Monday, 9 Nov 2009 | 10:29 AM ET

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By: Phil LeBeau
CNBC Correspondent

General Motors logo
The latest sales numbers out of China this morning are further vindication that General Motors strategy in that country is paying off.

Thanks to a government incentive program stoking demand for new vehicles, GM sales soared 77 % last month - this at a time when auto sales for the entire auto industry also took off.

So far this year, GM has sold more than 1.5 million vehicles in China. Not far behind GM U.S. sales which are 1.71 million this year.

This is the kind of growth GM was hoping for when it first opened plants in China in the late 90's. At the time, critics called the strategy by then CEO John Smith and his top lieutenant Rick Wagoner and interesting move that could pay off someday. But back then the focus was on the steady decline in GM's U.S. business and not on how China sales might pan out in years to come.

It's now clear it won't be long before China passes the U.S. for good and for all automakers; it is becoming critical to not only have a presence in China, but also be ready to grow.

Ford recently announced a new assembly in the country and is increasingly focused on China. It has a long way to go before it comes close to matching GMs footprint there. GM is #1 in China, fighting VW for the top spot.

China will not stay red hot forever. And in fact, many people who work the China auto market expect sales to cool off substantially once the government incentive program ends.

But even then, GM is in the right position to benefit as the Chinese market continues to grow.

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