GM And Chinese Coportation Open Cadillac Plant in China To Woo Luxury Market

By Staff Writer

Jan 23, 2016 03:47 AM EST

General Motors (GM) opened a Cadillac plant in Shanghai, China with its main Chinese partner SAIC Motor Corp on Thursday costing $1.2 bln targeting the growing but crowded Chinese luxury market which of late has come under pressure from China's sluggish economy. The NYSE indicated increase in price of GM's shares on Thursday's trading.

According to ABC News GM had announced the $1.2 bil factory operated with SAIC Motor Corp will have an annual production capacity of 160,000 vehicles per annum. Cadillac began selling in China in 2004, coming late to a luxury market dominated by BMW, Mercedez Benz, Audi and Volkswagen.

Matt Tsien, President of GM China remarked they believe that there is strong potential for luxury ( cars) in China. He added, " Last year, obviously it's been a challenging market overall, not just for luxury but the overall market has moderated."

The Shanghai plant is expected to start producing Cadillac's CT6 model next week. Cadillac also makes two other models namely, XTS and ATSL at factories in Shanghai.

According to 4-Traders GM China has projected China's luxury-car market will have annual sales of 3.5 million units  a year by 2020 which would account for more than 10% share in the country's overall auto market. GM sold about 80,000 Cadillacs last year in China which is about 4.2% share of the luxury segment.

According to data from China Association of Automobile Manufacturers (CAAM) sale of cars in China rose 7.3% last year to 21.1mil from a year earlier compared with a 10% rise in 2014 and a 16% gain in 2013. CAAM is a government back association.

The luxury car market as with other luxury items like jewellery, watches and other high-end products has been hit by economic doldrums. It has been hit by anti-corruption campaigns in China that deter gift-giving and extravagant spending.

According to Ways Consulting, a Chinese research firm focused on local automative industry revealed that sale of luxury cars rose only 1% in the first 11 months of 2015 compared with 21% rise in the whole of 2014 and bigger double digits in previous years. According to GM China's Mr.Tsien, Cadillac delivered 17% more cars to Chinese consumers in 2015 than in previous years.

Cadillac missed out on China's crossover sport-utility-vehicle boom hence its SRX crossover is out of fashion. Cadillac in a move to compete with the other luxury car makers of Europe will launch the XT5 to replace the SRX. Cadillac is faced with fierce competition from other brands and in order to lure customers to purchase a Cadillac dealers are forced to give big discountsm as much as $6000 or 40,000 Yuan.

According to Benzinga shares of GM at NYSE were trading higher by more than 1%. The Cadillac plant opened on the same day namely, Thursday.

It appears that GM is making a bold move to make an investment entry via a $1.2 bln plant in Shanghai at a time when  the luxury market is cooling by China's economic slowdown.

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