If General Motors (NYSE:GM) stays true to form in focusing on China as a major growth opportunity, it could soon be building a new auto plant there. The world’s leading carmaker for 2011 — just ahead of Germany’s Volkswagen (PINK:VLKAY) – has received approval from the Hubei Environmental Protection Bureau to build a plant in the central China city of Wuhan.
The $1.1 billion factory would have an eventual annual capacity of 300,000 vehicles, the notice said. That would add nicely to GM’s current Chinese capacity of about 2 million light vehicles a year. “GM has been running with tight capacity and the expansion will make the company even more competitive,” Cao He, an analyst with China Minzu Securities Co. in Beijing, told Bloomberg. “To have a foothold in central China will also bring GM closer to its clients there and lower logistic costs.”
Even with this essential environmental approval in hand, GM apparently hasn’t yet made a firm decision to build the Wuhan plant. The Associated Press reported that “GM’s office in Shanghai did not comment directly on the project Friday, but issued a statement saying the company would make ‘sustainable plans’ for expanding production capacity based on market conditions, and would share details ‘at a proper time.’”
GM’s Chinese operations are a joint-venture with state-owned Chinese automaker SAIC. The venture accounted for sales of 2.55 million vehicles in 2011, up 8.3% from 2010, according to Bloomberg. Competition in China is likely to get only more intense as GM rivals Toyota (NYSE:TM) and Ford (NYSE:F), among others, continue to focus on similar expansion plans in this burgeoning auto market.