General Motors Company (NYSE:GM) reported Higher margins in the USA than China in light of the slowing Chinese economy in the first half of the year.
The company had earlier posted low sales margins in the Chinese market owing to the slowed economy. China has been the biggest market for the company. Most customers had resulted to buying cheaper vehicles that the local market in China was offering. This in turn made it extremely difficult for GM and other outsider firms. The positive outcomes in the home market was greatly influenced by the growing demand particularly for the SUVs.
The company reported that together with its Chinese partners, it sold about 1.72 million vehicles within the first half of the year. Despite the poor demand in China, General Motors Company (NYSE:GM) and other vehicle manufacturers have been experiencing healthy sales in other regions. This is particularly due to the decreasing fuel prices that have encouraged many people to buy. For example, SUVs are preferred by many because they are roomy and thus more comfortable. However, they are heavy and powerful thus their fuel consumption is much higher. Hence, most people tend to shy off. But lower fuel prices have been a great incentive.
According to Zhang Jing, a Shanghai-based analyst at Phillip Securities (HK) Ltd, the trends for the Chinese and American markets appear to have reversed. He also pointed the slow Chinese economy as a culprit together with a few other products. The resultant effect forced GM to cut vehicle prices for more than 40 of its models in May.
General Motors together with its partner, SAIC Motor Corp., announced that they had cut prices by as much as 53,900 yuan ($8,685). The company reported a 0.2% profit in June from the 246,066 vehicles that the company sold in China.
In order to avoid losses, the company had to cut ties with many dealers so that it can carry out retail deliveries. General Motors Company (NYSE:GM)’s president for the Chinese division Matt Tsien announced the company’s plan to introduce new models in the country to boost the sales level.