Bloomberg News

Reviled in U.S., Buick Minivan an Unlikely Hit in China

August 20, 2012

Buick Minivan Choice of New CEO in China

A General Motors Co. (GM) Buick GL8 is driven in Shanghai. Photographer: Nelson Ching/Bloomberg

General Motors Co. (GM:US) sells a model in China so popular with executives that it’s often lined up outside galas and high-end restaurants: A Buick minivan.

If it’s surprising that China’s business elite prefer these big, boxy models to luxury sedans, it’s perhaps more striking that GM’s Buick GL8 is the hands-down leader. The Detroit-based automaker did so poorly in minivans that it quit making them in the U.S., where they are often considered the least-glamorous family haulers, spurned by moms who prefer the style of a sport- utility vehicle.

“It is a perfect example of where one product can be revered in one country and reviled in another,” said Rebecca Lindland, an industry analyst with IHS Automotive. In China, the Buick GL8 is “ubiquitous, like a Town Car in Manhattan or chauffeured limousine in L.A. The assumption is that someone important is in one.”

Sales in China of the GL8, which retails for as much as 388,000 yuan ($61,000), rose 28 percent last year to 66,900, according to researcher LMC Automotive. That’s more than double the sales of Honda Motor Co. (7267)’s Odyssey, the No. 2 foreign-brand minivan, LMC said.

Minivan sales will grow 13 percent this year to 560,000 units, the second-best performing category after sport-utility vehicles, China’s Association for Automobile Manufacturers forecasted on July 26.

Yacht Interior

With an interior modeled after a luxury yacht, the GL8’s appeal is that there’s room for several adults to sit comfortably and conduct business. The newest version comes with automatic sliding doors and a 220-volt electric socket for laptops, as well as optional leather seats and DVD player.

“In the U.S., if you have a chief executive driving a minivan, it looks funny,” said Allen Tsaur, president of Asian operations for Ohio-based Cooper Tire & Rubber Co. in Shanghai, who has leased four GL8s during the past decade. “Here, people accept that. It’s become the norm.”

The minivan is a high-margin vehicle that helps boost GM’s profits while most of its growth in China is coming from cheaper, bare-bones commercial vans.

“This is a home run,” Tim Lee, president of GM’s international operations, said in April at Beijing’s Fairmont Hotel, where hotel staffers polished a pair of Buick minivans out front.

The GL8 was first introduced to China in 1999, and the research and development venture between GM and its Chinese partner SAIC Motor Corp. led the redesign of a new version that went on sale in late 2010.

Expenses Amortized

Development costs, based on a vehicle architecture that dates back more than a decade, were long ago paid for, making the GL8 “without a doubt” one of GM’s most-profitable vehicles in China, said Joe Phillippi, principal of consulting firm AutoTrends Inc. in Andover, New Jersey.

“Essentially everything is free,” Phillippi said. “They’ll ride that pony until it dies.”

The Buick’s success is attracting more competition, including Ford Motor Co. (F:US)’s S-Max and Toyota Motor Corp (7203)’s Alphard, said John Zeng, an LMC analyst based in Shanghai.

Minivans are well-suited for China where executives tend to travel with a larger entourage than their counterparts in western countries, said Jochen Siebert, managing director of JSC Consulting in Shanghai.

“If you have a normal sedan, you already have one seat less because you have a driver in front,” said Siebert, who leases a GL8 as a company car and uses it to pick up clients. Sedans are “not as comfortable, as saying, ‘Hey, I have a GL8. Let’s go to the back and talk.’”

More Entrants

The GL8 started out as a family car for expatriates with families too big to fit in a sedan, said Terence Chiu, general manager of Anji Car Rental & Leasing Co., a joint venture of Avis Budget Group Inc. (CAR:US) and SAIC. Those foreign business people started using them as executive wagons and they soon caught on with locals, he said. The model is so popular that it accounts for about 17 percent of Anji’s fleet, Chiu said.

Minivans are a “smart solution” for China, said Bryan Nesbitt, head of GM’s design operations in the country. It shows that “you can create something that’s more practical” than a low-slung sedan, Nesbitt said, while still having “an emotional appeal.”

--Liza Lin and Tim Higgins. Editors: Jamie Butters, David Rocks, Bill Koenig.

To contact the reporters on this story: Tim Higgins in Detroit at thiggins21@bloomberg.net; Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net; Young-Sam Cho at ycho2@bloomberg.net


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