GM opens new plant in Shanghai

General Motor Corp. opened a new plant in Shanghai on Saturday to bring its production capacity to half a million units nationwide

The new facility, part of GM’s $ 3 billion investment blueprint with its Chinese partners, is capable of churning out 160,000 medium-sized Buick Excelle sedans and could produce the Cadillac STS luxury sedan in the future.

Operations at the plant, located on the outskirts of Shanghai’s financial district, began on Saturday, the U.S. auto maker said.

"There is no country more important than China for the auto market," said GM’s Asia Pacific chief, Troy Clarke, at the opening ceremony for the plant.

Clarke said China’s auto market would develop faster than any other market in the world in the next 10 years but did not elaborate.

He has previously said the Chinese market would grow through the end of the decade at an average annual rate of 10 percent.

The new facility doubles the venture’s capacity in Shanghai to 320,000 units and brings its nationwide capacity to 480,000.

Global auto makers including Ford Motor Co. (NYSE:F - news), Nissan Motor Co. Ltd. (7201.T) and Toyota Motor Corp. (7203.T) are investing $ 15 billion to triple annual production in China to seven million cars by 2008, triggering fears of a glut.

China has been a rare bright spot for embattled GM, but the market began slowing in the middle of last year when Beijing stepped up curbs on easy car loans and implemented other measures to cool the economy. Before that, sales averaged double-digit growth as the growing middle class took to the roads.

Volkswagen AG (VOWG.DE), the market leader, which counts China as its largest market outside Germany, posted a 6 percent drop in sales at its two ventures in 2004. Closest rival GM posted a 27 percent rise in vehicle sales in 2004, but that was little more than half the pace it set in 2003.

To make things worse, a growing number of foreign car makers are offering discounts to carve out market share in the country. In March, GM slashed the prices of two Buick models in China by up to 15 percent to counter a move by Honda Motor (7267.T) (NYSE:HMC - news).

Yet the U.S. firm is sticking with a plan to invest over $ 3 billion with Chinese partners to double capacity in the country to 1.3 million units by 2007, betting that the market will recover in the second half of 2005.