VW no intention to cut capacity, GM stick to original profit goal in China

Though the current downturn in Chines auto industry had discouraged foreign automakers in adding more investment, they deemed China as their significant new vehicle market for expanding sales and profit. For example, VW’s sales quantity in Chines market accounted for 40 percent of the group’s global sales volume. Even if the group assumed annual sales drop this year as its sales in China decreased 4 percent in the first half of the year on a year-on-year basis, the company announced that it would not cut capacity in Chinese plants. GM would struggle to realize the annual profit sales this year in China through all kinds of measures.

According to a report of the German newspaper, Der Spiegel, VW spokesman Lampersbach stated in an email that VW has no intention to cut capacity In China amid the demand decrease. Prior to the report, Der Spiegel had also reported that VW planned to reduce the work days of Chinese factories from 300 days to 270 days.

Multinational automakers had experienced in the first half of the year average low capacity utilization of 94.3 percent, which was predicted to be even lower in the future, according to statistics of Sanford Bernstein Corporation. In the turbulent auto industry in China, many multinational automakers and Chinese automakers continued to build plant in China, making the country enjoy the highest growth rate of new assembly number among the world.

Like VW, GM also deemed China its biggest market worldwide, and therefore the share price of the corporation decreased because of its dull sales in Chinese market. Shareholders worried that GM might fail in realizing the annual profit goal. But, Mary Barra, CEO of GM has urged its managing team in China to encounter for the downturn in Chines market so that the company would reach the profit margin goal of 9 percent to 10 percent. Mary pointed out that solutions will be implemented in cutting the cost of auto materials and launching highly priced SUV models in China via cooperation with Chinese automakers.