GM rolls back ‘radical’ plan to offer only three-cylinder engines in some China cars -sources

By Yilei Sun and Norihiko Shirouzu

BEIJING (Reuters) – General Motors Co is backtracking on an aggressive promotion of three-cylinder engines in China that saw some Buick and Chevrolet models offered only in that option – a move which proved highly unpopular and helped sales slide, people familiar with matter said.

Three-cylinder gasoline engines are cleaner and more fuel efficient than their conventional four-cylinder counterparts, and automakers are keen to promote them, particularly in China which has some of the world’s most stringent fuel economy and emission rules.

GM went further than competitors, discontinuing four-cylinder versions for many models in the world’s largest auto market. By comparison, Honda Motor Co <7267.T> and BMW also offer three-cylinder cars in China, but the models are an option in addition to four-cylinder versions.

Many Chinese consumers, however, perceive cars with three-cylinder engines as noisier and prone to vibrating, and sales began to tumble in third quarter of 2018. Last year, GM’s China sales fell 15% to 3.09 million vehicles, its second straight year of steep declines and the lowest level since 2012.

The move was “too quick, too radical and lacked sophisticated planning,” a senior Shanghai-based sales manager at a Buick dealership told Reuters.

The sales manager, who was not authorised to speak to media and declined to be identified, said his company was among hundreds of dealers which lobbied GM to change the plan at dealer conferences.

GM China President Matt Tsien told investors in New York on Wednesday that consumers have been reluctant to accept three-cylinder engines, and confirmed that later this year the automaker will offer four-cylinder engines in certain models currently offered only with the smaller engines.

By resurrecting four-cylinder options for key models, the hope is that GM, which reports fourth-quarter earnings later on Wednesday, can regain some of the ground it has lost at a time when the new coronavirus is threatening to sink sales in the first quarter.

The outbreak is only adding to pain caused by to a slowing economy, U.S.-China trade tensions, and new emission rules, as well as fierce competition from Toyota Motor Corp <7203.T> and Volkswagen AG .

SAIC-GM, the Detroit automaker’s main venture with SAIC Motor <600104.SS>, is seeking approval for four-cylinder versions of two mass-market sedans, Buick’s Excelle GT and Chevrolet’s Cruze, government documents show.

Those two versions are slated to hit the market sometime in the second quarter, two people with knowledge of the matter said, adding that four-cylinder versions of the Buick Verano sedan and Encore GX sport utility vehicle were also under consideration.

A Shanghai-based GM spokeswoman said the automaker will continue to offer three- and four-cylinder engines in the future but declined to comment on product plans.

(Reporting by Yilei Sun and Norihiko Shirouzu in Beijing; Editing by Edwina Gibbs)