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GM ups capacity in no-frills China car market

By Norihiko Shirouzu

BEIJING (Reuters) - General Motors Co. and its local partners, intensifying competition in China in the no-frills car market, on Sunday formally opened another plant for its low-cost Baojun brand.

The plant in the southern China city of Liuzhou is Baojun's second producing cars priced as low as 40,000 yuan ($6,400).

Much of the competition in China's auto market is focused on the cheaper end of the market where foreign-led joint ventures targeting China's emerging middle class are piling pressure on indigenous entry level manufacturers like Geely and Chery.

By 2013, some 65.6 million household in China will have annual incomes of 60,000 yuan or more - a level deemed sufficient for a family to buy a no-frills car, according to an estimate by U.S. consulting firm Alix Partners.

The latest Baojun opening follows Nissan Motor Co.'s launch earlier this year of the second of five models of the no-frills Venucia marque it and its local partner plan to introduce into China by 2015.

Nissan aims to sell 300,000 Venucia cars a year y 2015.

GM's new plant in Liuzhou, where GM operates as part of the SAIC GM Wuling Automobile Co. partnership, will eventually have capacity to produce 400,000 cars a year.

GM officials said the plant was likely to produce cars not just for Baojun but the venture's other low-cost brand Wuling. It was not immediately clear when the new factory is expected to hit full capacity.

GM said it has invested 8 billion yuan for the first phase of construction of the plant, where the Baojun 630, the brand's first car to hit showrooms last year, rolled off the assembly line on Sunday.

GM so far has two products for Baojun: the 630 compact sedan, which has a starting price of 62,800 yuan, and a mini car called Le Chi.

In addition to GM and Nissan, Ford Motor Co. and Toyota Motor Corp. have said they are racing to launch affordable cars in China priced around 60-70,000 yuan.

($1 = 6.2356 Chinese yuan)

(Editing by David Cowell)

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