General Motors Company’s (GM) Chinese joint venture, SAIC-GM-Wuling, plans to assemble automobiles in Egypt using kits imported from China. The move will help the automaker compete in the Egyptian market targeted by domestic car exporters in China.
SAIC-GM-Wuling manufactures mini-vehicles including minivans and small cars. The joint venture plans to launch a new van, Chevrolet Move, in Egypt, which will help GM expand its market and improve competitiveness.
Production of Chevrolet Move is expected to begin by the third quarter of 2012. GM plans to produce nearly 5,000 Moves per year.
GM and Egypt
Currently, GM sells Chevrolet lineups and Opel lineups in Egypt through its joint venture, General Motors Egypt S.A.E., jointly owned by the company (31%), Japan’s Isuzu Motors (20%), some Egyptian investors (33%) and some Saudi investors (16%).
Among the vehicles sold by the joint venture, Chevrolet N Series and Opel Astra are imported in Egypt and sold domestically and in other African markets, (including Chevrolet N200 van that is imported from China).
The joint venture operates an assembly plant in the 6th of October City in Egypt. It was set up in 1985 and revolutionized the automotive industry in the country.
The Egyptian automotive market began to expand since 2004. The vehicle sales in the country are expected to increase from 72,417 units in 2004 to 444,000 units by 2012.
China Exports
Exports of China-made vehicles dwindled until last year due to surging local demand. In 2010, exports of those vehicles accounted for a meager 3% of 18.3 million vehicles produced in China. The percentage is far behind South Korea, Thailand, India and Brazil.
However, local demand began to soften this year with the withdrawal of tax incentives and subsidies supporting sales of compact and energy efficient vehicles, triggering a growth in exports.
According to China Association of Automobile Manufacturers, exports soared 57% in the first half of the year to 454,400 vehicles. The country’s top export markets included Algeria, Russia, Brazil, Vietnam and Chile.
GM Results and Outlook
In the third quarter of 2011, GM posted an 11% decline in profit to $1.74 billion from $1.96 billion in the same quarter of 2011. Nevertheless, on a per share basis, the profit of $1.03 was higher than the Zacks Consensus Estimate of 99 cents. It compared with $1.20 in the third quarter of 2010. The decline in profit was attributable to lower interest income and other non-operating income (net), loss on extinguishment of debt and income tax expense.
Meanwhile, GM’s hometown rival Ford Motor Co. (F) fared well by posting a narrower 3.5% fall in profit to $1.85 billion in the quarter from $1.91 billion in the same quarter of prior year. However, on per share basis, earnings were 46 cents versus 48 cents a year ago, beating the Zacks Consensus Estimate of 44 cents. The decline in profit was attributable to fall in commodity prices and anticipated reductions in Financial Services results.
GM, a Zacks #3 Rank (Hold) stock, had to seek bankruptcy protection in 2009 due to unfavorable economic conditions and a rapid decline in sales. However, the automaker recouped its sales and earnings by banking on the emerging markets, economic recovery and improved cost structure. The company completed its IPO at the end of 2010, through which, it has repaid $23.1 billion to the U.S. government.
Based on the current industry outlook, the automaker expects an adjusted EBIT in the fourth quarter of the year to be similar with the fourth quarter of 2010 due to seasonal trends in North America and ongoing weakness in Europe. However, it anticipates the adjusted EBIT for 2011 to show solid improvement over 2010.
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