GM Erects Lofty Goals in China’s Luxury Market

Cadillac ELR

China is a crucial market for luxury car makers, and is expected to become the world leader in the segment by 2020. That is why General Motors (NYSE:GM) is so determined to increase its stake with its Cadillac luxury brand, which thus far has failed to entice Chinese buyers.

Before the automaker’s groundbreaking ceremony for its new Cadillac assembly plant in Shanghai on Wednesday, Bob Socia, head of GM’s China operation, told reporters that the U.S. automaker is erecting big goals for Cadillac in China as it launches its new luxury brand models. While GM also sells Buick and Chevrolet in the region, the ever-growing luxury market is gaining much of the carmaker’s focus as it combats sales slumps and aims to win 10 percent of that market by 2010. It is hoping to triple Cadillac’s sales to 100,000 units by 2015, and is willing to bring out a new model each year through 2016 to make it happen.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

But Cadillac is not only battling rigid competition from BMW, Mercedes, and Audi, but is also trying to appease tough Chinese critics who thus far have been unimpressed with what the Cadillac has to offer. According to Reuters, while GM sold 149,782 Cadillacs in the United States last year, it only sold a paltry 30,010 in China. So the brand will need to find a way to better attract the Chinese buyers if it wants to hit its target of 250,000 luxury car sales by 2020 in a market that, according to CEO Dan Akerson, will account for up to 40 percent of the world’s total luxury auto market by the end of the decade.

Unfortunately for luxury carmakers, Chinese President Xi Jinping is encouraging his people to be more frugal and cut down on lavish spending at a time when the country is witnessing slower economic growth and is attempting to cut down on corruption. That is why Han Weiqi, an auto analyst with CSC International Holdings Ltd, believes the “luxury car demand should hold at around 10 percent growth,” as reported by Bloomberg.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Meanwhile, although the Cadillac’s sharp style has yet to deter buyers in the U.S., GM has decided to tone down its look in China so as to better appeal to the region’s buyers. They’ll see a refurbished Cadillac SRX crossover and a Cadillac XTS (produced locally) this year. And that’s not all. The automaker plans to introduce 10 or more new or upgraded products in China each year through 2016 — a lofty goal, but one that is necessary if it wants to maintain its stake in the hyper-competitive market.

Though Cadillac is GM’s fastest-growing brand, its sales in China are only increasing at about half the pace that the carmaker expected.

Don’t Miss: GM Is Making Production Numbers Secret.