General Motors has announced plans to “change its business model” in Russia, which is a gentle way of calling it quits for the third time in a few years time. In 2013, GM withdrew Opel from the Australian market after less then one year of trying. A few months later, Chevrolet was announced to quit the European car market (excluding Russia) in order to give Opel a shot at returning to profitability. And in a final attempt to stop the bleeding of cash at its European operations, both brands will say “пока-пока” to the Russian market.
Opel Group CEO Dr. Karl-Thomas Neumann said, “We do not have the appropriate localization level for important vehicles built in Russia and the market environment does not justify a major investment to further localize.” With which they mean they’ve completely misjudged the market and failed to offer a competitive, locally built subcompact sedan to defend itself against the surging Hyundai Solaris (a.k.a. Accent outside of Russia), Kia Rio and Renault Logan.
Opel will leave the market by the end of this year and Chevrolet will be minimized to “iconic” vehicles like the Corvette, Camaro and Tahoe. Oh, and of course Cadillac will stay in Russia, in a desperate attempt not to lose its self-proclaimed “Global luxury brand” title. Mind you, this is a market where GM sold a combined 288.308 vehicles in 2012 (that’s only three years ago), of which more than 200.000 Chevrolet, 80.000 Opel, and……. 2.024 Cadillac cars and SUVs. Its share of the Russian car market was almost 10% that year and thinks were looking so good for the future, that GM announced an investment of US$1 Billion between 2012 and 2017 to increase production capacity of its St. Petersburg plant. Yes, the one they have now decided to shut down within the next few months.
Despite its high expectations for its Russian operations, which GM hoped would counterbalance continued losses in the rest of Europe, we all know how sour that market has turned, with total car sales losing half a million units of volume in just 2 years: from almost 3 million units in 2012 to less than 2,5 million in 2014, and contracting another 24% in January 2015 as a result of Western sanctions against Russia and economic uncertainty thanks to president Putin’s war-hungry behavior.
And General Motors has been hit harder than the rest of the market, with less than 190.000 sales (losing a third of its volume in 2 years) and market share down to 7,6% in 2014. This year, the bleeding accelerated, as GM sold only 8.362 cars in the first two months of the year, down more than 70% on last year in a market that dropped 32%. From that perspective, it would make sense for the brands to withdraw from the market. GM has been promising its shareholders a return to profitability for its European operations for years, without any success, so desperate times require desperate measures.
But then I don’t understand why Cadillac would not be discontinued as well: the brand sold just 72 vehicles in the first two months of 2015, compared to 1.109 for Infiniti, 1.481 for Lexus, 3.502 for Audi, 6.095 for BMW and 8.075 for Mercedes-Benz. Oh, and 162 for Acura, a brand that’s only been introduced in Russia last year. If Russians are obviously not interested in the brand, why stubbornly trying to force the cars onto the market? Is it really just so the brand can claim to be a worldwide player?