SHANGHAI — A decade ago, this city had five car dealerships selling Buicks, the top-selling General Motors brand in China. Today it has 27.
And the crowds of shoppers that fill many of them are young, ready to pay cash and not inclined to haggle over the sticker price.
As GM prepares a public stock offering later this year, China is emerging as a crucial piece of its appeal to potential investors — and a surprising down payment of sorts for U.S. taxpayers, who would begin shrinking their 61 percent equity stake in the company.
In the first half of this year, GM’s China sales rose 48.5 percent over the same period last year, and for the first time ever, the automaker sold more vehicles in China than in the United States. Just 13 years after entering China, GM says the country accounts for a quarter of its global sales — blistering growth that even GM did not expect this soon.
“China’s a big piece of the value of the company,” said Stephen Girsky, GM’s vice chairman for corporate strategy and business development. “And since we pull cash out of China, it helps fund investments in other parts of the company as well.”
Analysts estimate GM is worth $50 billion to $90 billion, with China accounting for about $15 billion of that total. The U.S. government converted about $43 billion of aid to GM into its equity stake, which is expected to be sold off over time after the company is publicly traded.
Through joint ventures with China’s SAIC Motor Corporation and other local manufacturers, GM is this country’s largest vehicle manufacturer, accounting for about 13 percent of the nation’s fragmented car market.
While GM’s fast-growing China operations are helping to offset the automaker’s problems in the United States, it ultimately will need to do better on its home turf to restore its financial health. On that score, GM earned a first-quarter profit of $1.2 billion in North America, after losing $3.4 billion the previous quarter, but its U.S. market share so far this year is down from 2009.