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GM Daewoo gambles with first SUV, keeps it small

Written by: Staff

MUJU, South Korea, June 7: GM Daewoo, South Korea's No.3 auto maker, has launched its first sports utility vehicle, betting a small model can woo buyers despite a backlash in some markets where SUVs are seen as costly gas-guzzlers.

Unlisted GM Daewoo Automotive&Technology Co., in which General Motors Corp. and partners took a majority stake in 2002, said it aimed to sell more than 120,000 of the SUVs next year, including more than 30,000 units at home.

Analysts were divided over the prospects for the ''Winstorm'', launched at a time when surging gasoline prices have dented SUV sales. But GM Daewoo CEO Nick Reilly was upbeat.

''The (SUV) segment in Korea is still very significant. It's still a very important segment in many, many markets around the world,'' Reilly told reporters at the media launch in the mountainous resort of Muju on Wednesday.

The SUV will be sold overseas as the ''Captiva'' by Chevrolet and Holden. GM Daewoo exports about 90 percent of its vehicles.

Some analysts said the launch was risky given near-record oil prices and as Seoul lifts tax breaks on SUVs.

''The timing is pretty bad as the SUV market is dead,'' said Choi Dae-sik, auto analyst at CJ Investment Securities, adding that SUVs cost more than sedans and were no cheaper to maintain.

The government is expected to progressively raise taxes on SUVs by 2008 to match those imposed on passenger cars. South Korea had classified SUVs as commercial vehicles.

Other analysts say the small SUV -- it has a 2-litre engine and is GM Daewoo's first vehicle available with a diesel engine -- is in line with the firm's specialisation in sub-compact models and should be attractive with its better fuel efficiency.

''This is not a traditional SUV,'' said Suh Sung-moon, an auto analyst at Korea Investment and Securities. ''Rising oil prices have hurt medium and large-size SUV markets -- but not the smaller models.'' The firm plans to release a sister vehicle to the Winstorm next year, and aims for total SUV sales of 200,000 units.

''In more developing markets, the SUV is still growing. We believe there is plenty of room for us to sell 200,000 of this vehicle around the world,'' said Reilly, who next month becomes GM Group vice president and president of GM Asia Pacific.

GM Daewoo sales have tripled since Reilly took over in South Korea three-and-a-half-years ago.

South Korea's SUV and minivan sales peaked in 2002 when they made up for about a third of total auto sales. According to Korea Automobile Manufacturers Association data, local firms sold 73,591 SUVs in January-April, one-fifth of total sales.

GM Daewoo, which trails Hyundai Motor Co. and its affiliate Kia Motors Corp. in South Korea in sales volume, aims to sell up to 1.5 million vehicles this year, compared with 1.15 million in 2005. In January-May, it sold 607,812 vehicles, up 47.1 percent from a year ago.


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