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GM to Sell Made-in-China Buick in U.S.: Will America Buy It?

General Motors Co.GM may soon become the first U.S. automaker to import vehicles from China for sale in the U.S., per media reports. The company reportedly plans to import nearly 30,000-40,000 Buick Envision vehicles made in its Chinese plant from early next year.

However, the move is not expected to culminate before the signing of a new labor contract with the United Auto Workers, which has not yet been approved by union members although General Motors has agreed to it. The union members are said to be concerned about production prospects in the U.S. as automakers continue to shift vehicle production to low-cost regions. However, it is expected that they will not protest against the plans to import vehicles as General Motors has consented to increase wages and provide job guarantees.

Moreover, the company claims that the plan to import vehicles from China is not aimed at cost savings, but to bring a new product to the U.S. market. General Motors currently sells two Buick SUVs in the U.S. - the Enclave and the Encore- both of which are very popular. The company hopes that the addition of the Envision will boost its sales further.

General Motors currently sells all vehicles made in China locally. However, with the recent weakness in the Chinese market, it makes sense to utilize the production capacity to import some vehicles to the U.S.

The news about General Motors' plans to sell China-made Buicks in the U.S. was first reported in August. Per those reports, the Buick brand will also be shifting the production of the compact Verano sedan from Michigan to China by late 2016. In addition, General Motors will transfer the production of the mid-size Regal sedan from Canada to either China or Europe in 2017. Also, the compact Cascada convertible will be imported from Europe, starting early next year. The sub-compact Buick Encore crossover, which is currently imported from Korea, is also expected to be produced in China soon.

However, General Motors will continue with the production of two of Buick's future U.S. models, the mid-sized LaCrosse sedan and the large Enclave crossover, in North America. The LaCrosse will be redesigned next spring and the production will be shifted to Hamtramck, MI. The Enclave will also be redesigned in early 2017, but the production will continue in Lansing, MI.

General Motors' Buick brand enjoys a huge market in China. In 2014, the Buick line sold 919,582 vehicles in the country - almost four times higher than 228,963 units of Buick sold in the U.S. General Motors believes that its sales volume for Buick in the U.S will not be large enough to justify the establishment of a plant in the U.S. In such a situation, the efficient and cost-effective solution would be to import the vehicles from China.

Many U.S. automakers, including Ford Motor Co. F , are gradually considering a shift in production of vehicles from the U.S. considering the cost benefits involved.

General Motors currently carries a Zacks Rank #2 (Buy). Other well-ranked automobile stocks include O'Reilly Automotive Inc. ORLY and Pep Boys - Manny, Moe & Jack PBY . Both stocks carry the same Zacks Rank as General Motors.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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