What happened
General Motors (NYSE: GM) stock is on the move Tuesday afternoon, up 2.2% as of 2:25 p.m. ET, on news that GM may be "gearing up" to launch a new car brand in China.
So what
As Reuters reports today, General Motors is planning to "create a new, independently owned premium brand in China" that will sell "halo cars." Reuters goes on to explain that halo cars (a term dreamed up by Julian Blissett, president of GM China) refers to "premium, often high-performance cars that have an edgy design." So halo cars are probably not any of the upcoming mass-market electric cars GM has already announced in the U.S.
The new brand, yet to be named, will be "wholly owned" by GM, says Reuters. It will not necessarily be associated with any of GM's existing brands currently operating in China, which include Chevrolet, Buick, and Cadillac, and also local brands Wuling and Baojun.
Image source: Getty Images.
Now what
Aside from the above, details of GM's plans for its new halo brand "are scant," lament our friends at TheTruthAboutCars.com (TTAC). And the reason for that is that, apparently, GM had hoped to keep this news under wraps for a while longer and was "caught with its pants down" when local news sites in China began to break the story!
That being said, based on the very little that has been revealed, it's possible to surmise a couple of things:
First, this is good news for GM. It will be selling in-demand, presumably luxury vehicles, which implies high profit margins on the vehicles. The fact that GM will own the new brand outright, and not be forced into a joint venture with a local Chinese company, is also a plus as it will minimize the risk of intellectual property theft by Chinese partners, observes TTAC.
It still remains to be seen, however, whether GM will be selling cars "for import only," as TTAC surmises, or manufacturing the halo brand locally. If the former, then the company will presumably have to deal with import tariffs raising its prices and depressing demand. If the latter, profits should be more robust. But GM may first incur upfront costs from building a factory dedicated to producing the new brand.
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