03:39 PM EDT, 08/14/2024 (MT Newswires) -- General Motors ( GM ) and joint venture partner SAIC Motor are likely to shift their strategy for China, which may involve producing electric vehicles and focusing on upscale models, UBS Securities said in a note emailed Wednesday.

"This news shouldn't be overly surprising as [GM Chief Financial Officer] Paul Jacobson had indicated that some restructuring was needed to get the SAIC-GM [venture] competitive, restore profitability and get the entity to self-sustaining cash flow," UBS said.

The venture may shift to producing electric vehicles, and importing premium vehicles, UBS said, adding that "we believe this strategy could also be challenging given the competition and Chinese consumer preference for local brands."

The venture, which produces Buick, Cadillac, and Chevrolet vehicles in China, saw its production fall from 2 million in 2017 to 1 million by 2023, with sales dropping from 1.9 million to around 870,000, UBS said, adding that GM also has the SAIC-GM-Wuling joint venture, which sold 1.2 million units in 2023.

"If [SAIC-GM] does pivot to more electric vehicles, we believe the venture may look more towards domestic Chinese suppliers. With foreign suppliers (or existing [SAIC-GM] suppliers) clearly have an opportunity to try to win business with the pivot, we believe they should also have tough conversations about if they want to commit capital to these future programs," UBS said.

UBS has a buy rating on GM with a 12-month price target of $64.

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