General Motors (GM), the world’s third largest automaker, is investing $5 billion in a new family of vehicles targeting many of the world’s fastest-growing emerging auto markets.
“The fundamental story here is one of growth,” said Dan Ammann, president of General Motors.
The vehicles, ranging in size from a compact car to a small crossover utility vehicle, will be built and sold primarily in four developing markets: Brazil, China, India and Mexico.
The new models will be sold under the Chevrolet brand with the first ones planned for the 2019 model years.
GM is giving few details about the specific types of models it is planning or the price at which they will be sold, but Ammann described them as “global growth cars.”
The blueprint for expanding global sales comes after several retrenchments over the last two years, with General Motors stopping production in some foreign markets including Russia and Australia. The company has also announced plans to curtail operations in other countries, such as Thailand and Indonesia, where turning a consistent profit has been difficult.
So why does GM think it can do better in developing markets with a new slew of models?
“The central theme here is starting with what we think will be the customer requirements in different markets and working backwards from there to figure out how we deliver to those requirements at a value point that will allow us to make a good return on our investment,” said Ammann.
For starters, that means sharing development costs with its joint venture partner in China, SAIC Motor. The two companies will jointly develop the engine and vehicle family core architecture. GM and all automakers are racing to reduce the number of different architectures or platforms used to build vehicles in hopes of saving money and maximizing the efficiency of their global operations.
On paper, consolidating platforms makes sense and seems like something automakers should be able to do fairly quickly. In reality, the demands of different markets with different requirements for vehicle safety, fuel efficiency and other factors has made it tough for automakers to streamline operations in far-flung markets.
Ammann believes GM’s new plan for high growth foreign markets will eventually lead to annual sales of two million vehicles.
“We believe from an investor stand point that it’s important that we are placing bets in growth areas for the company, that we’re growing the business, but that we’re doing that in a profitable way and earning the right kind of returns on capital,” he said.
Last week, GM reported much-better-than-expected earnings for the second quarter. However, the $2.9 billion in profit was driven primarily by the automaker’s success in the U.S. and China, the world’s two largest auto markets. The automaker leads the U.S. in auto sales and is second in China behind Volkswagen.