By Tiffany Wu
SHANGHAI, June 4 (Reuters) - General Motors embarked on its third car production venture in China on Tuesday, hoping to tap the increasingly competitive low-end Chinese auto market by investing in a firm that sells mini-vans for a mere $3,000.
The world's largest auto maker signed a roughly $30 million deal to buy 34 percent of China's eighth largest car maker, SAIC-Wuling Automotive Co Ltd, to extend its product line in a bid to catch the eye of bargain-loving private Chinese buyers.
GM, whose two other Chinese joint ventures make compact cars, sedans and sport-utility vehicles (SUVs), said it would introduce new products to SAIC-Wuling and may help it export mini-vans and mini-trucks to other Asian markets.
"For $3,000, it's comfortable and has good quality. It ought to have a market outside of China," GM China President and Chief Executive Officer Philip Murtaugh told a news conference.
"That's an opportunity, it's not concrete plans," he said, citing Southeast Asia and India as possible areas to explore.
The well-established SAIC-Wuling, based in the southern province of Guangxi, sold more than 120,000 of China's 700,000 mini-vehicles sales last year.
Its commercial vehicles are priced at 26,000 to 39,000 yuan ($3,141-$4,711) each and its passenger variants range from 26,000 to 80,000 yuan, Murtaugh said.
The sector is the largest and fastest growing segment in the Chinese auto market and represents 30 percent of all vehicle sales last year, GM said.
RED HOT COMPETITION
One of the four largest mini-vehicle makers in China, Wuling began as a machinery and tractor maker in 1958 and switched to producing mini-vehicles in 1981. It has an annual capacity of 180,000 vehicles.
The U.S. auto giant said Wuling's mini-vans, which seat about seven people, would continue to carry their own brand and GM would introduce new products to the partnership.
It declined to give details.
Wuling's entry-level cars have to meet new environmental and safety regulations this year, such as requirements for fuel-injected engines and bumpers.
"Both of those changes are going to drive product cost increases and my expectation is that that will drive price increases," Murtaugh said.
The venture is 50.1 percent owned by China's largest passenger car maker Shanghai Automotive Industry (Group) Corp (SAIC) and 15.9 percent owned by Liuzhou Wuling Automotive.
GM also has a $1.5 billion plant in Shanghai with SAIC which makes Buick sedans and compacts, and a venture in northern China making higher-end SUVs.
GM faced heightened competition in China this year as many producers slashed prices to match lower auto import duties after China's World Trade Organisation entry in December.
Murtaugh said GM has had to "reposition" its Buick Sail -- a small hatchback modelled after the Opel Corsa -- by offering a cheaper model with component changes.
He also said GM's northern venture, Jinbei GM, lost money last year because the luxury sports utility vehicle market did not take off in China as anticipated.
The sector is crowded with six or seven domestic competitors, as many industry players had expected SUV sales to mirror the massive growths seen in Japan and the United States.
"It is a far, far more difficult segment with declining volumes. The imports actually have about 50 percent market share in that segment," Murtaugh said.
"In the U.S., these are personal use vehicles. People drive them because they like the riding position, they like the feeling they get driving a vehicle that says get out of my way. I don't think that that market mentality exists in China."
GM sold about 65,000 vehicles in China last year.