On Wednesday, the largest U.S. automaker, General Motors (NYSE:GM), broke ground in China. GM is building a Cadillac factory in China to target luxury buyers. GM CEO Dan Akerson said that ”We’re going to bring our high-end premium product here and we’re going to see how we run against the competitors from Europe and Japan.”
There has been a slowdown in the sales of luxury goods in China due at least in part to the government cracking down on officials’ corruption. However, GM does not seem worried as they say this should not affect long-term growth. GM expects China to account for two-fifths of the luxury car market by 2020, so they want to be prepared.
The plant is going to be built in Shanghai’s Jinqiao zone. It is going to have the capacity to produce 160,000 cars a year as well as a research and development center. Right now, GM only makes the Cadillac XTS in China at a factory that started production in February.
GM executives have plans to triple the number of Cadillacs sold in China by 2015 with a goal of 100,000 vehicles. The company has also stated that they want to release a new Cadillac model every five years in China.
Cadillac has to compete with a number of other luxury car brands in China’s market — some of them very different. Chinese buyers have been attracted to the Volkwagen AG’s Audi and GM’s Buick because of its organic and rounded design. However, the Cadillac SRX is very different with a chrome grille and more angular design, and GM is still trying to position it among more established brands in the market.
Competition among automakers is getting fiercer in the largest car market in the world. Ford (NYSE:F) is also taking steps to enter China, although they are trailing behind GM. By 2020, auto sales in China are predicted to be as high as 32 million. It is no wonder that GM and other automakers want a bigger piece of this market.
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