Cadillac is Merely Warming its Engine for a Massive Sprint
The brass at General Motors is apparently taking their recent successes in China with their Cadillac brand as a sign, and are willing to push in all their chips. Cadillac is ready to make a big push in the Chinese market, where it has shown some big spikes in sales, by deciding to build 95% of its Cadillac cars locally in Asia by 2018, as Bloomberg reports. The effort comes as GM hopes to make China the brand’s second key market behind the United States, and so far, the Chinese seem to be jumping on board.
“China is on an unstoppable path of ascendancy,” Johan de Nysschen, Cadillac’s president, told reporters from Bloomberg and others in Shanghai recently. “China is absolutely now, at the very, very center of our focus. We need to establish the Chinese market as the second volume hub for the Cadillac brand.”
GM has been putting a lot of effort behind resurrecting the Cadillac brand, which had grown stale and had little going for it in the eyes of younger consumers. With a new revamp of current models like the CTS-V, and the addition of new performance models like the ATS-V, there’s no doubt that the company is starting to make some waves not only in the American market, but abroad as well. With the amount of capital available for the yet barely-tapped Chinese market, and Chinese consumers’ apparent taste for luxury vehicles, GM says that they expect roughly 10% of all vehicle sales to involve luxury models within five years, and Cadillac is reportedly gearing up with new models in the pipeline.
So, how much success is GM actually planning on seeing in China in the near future? According to Business Insider, the company wants to sell as many as half a million cars per year by 2020. The plans call for dragging heavyweight luxury competitors like BMW and Mercedes into the ring, giving consumers another (and less expensive) alternative to those two European-based brands. Right now, GM has been seeing good success with its Buick brand, but the company higher-ups evidently feel that Cadillac could see just as much, if not more, success.
By building its cars in China, Cadillac and GM will be able to save a considerable chunk of change on custom and tariff costs, which can add up to almost a quarter of the cost of production. Cadillac is already building a couple models in China, the XTS and ATS-L, but is building a factory in Shanghai that will be dedicated to Cadillac production, slated to begin operations next year.
As mentioned previously, GM’s other luxury brand Buick has been having some pretty massive success in the Chinese market of late. According to a Motor Authority article released earlier this year, 2013 saw Chinese consumers purchase more than 1 million Buick vehicles, the first time that had happened since the mid-1980s. In fact, Buick sold more than four times as many cars in China as it did in the United States, shedding some light onto how the tastes of consumers may differ from those in the U.S.
Cadillac, which takes the luxury foundation that Buick lays and builds off of it, should be able to leap frog off of that success. Automotive News says that Cadillac brass expect sales of their vehicles to increase a whopping 40% this year over last. “We’re very optimistic about the luxury market, we believe that the luxury market by 2016 here will become the largest luxury market in the world, surpassing even the size of luxury in Europe,” said GM China president Matt Tsien.
Currently, and for the past several years, the German luxury automakers — BMW and Mercedes, in particular — have been dominating the Asian luxury segment. Even as GM’s brands have witnessed some big success this year with increasing sales, those luxury rivals haven’t slowed down, either. BMW reported a spike in sales for the first half of 2014 of 23%, as Fortune reports. As far as Mercedes is concerned, 2014 has thus far seen the manufacturer boost sales 23% in the Chinese market, as reported by The Economic Times.
And that’s not even adding in other competitors like Audi or Lexus. Further complicating and muddying the picture is Ford’s plans for its own luxury brand, Lincoln. Needless to say, the luxury segment in China is turning into an arms race, and the resulting fallout should definitely be interesting to watch. In fact, if Ford can’t make Lincoln a hit in China, the brand could be in serious trouble.
One other interesting thing to take into consideration is who is buying what in China, when it comes to luxury vehicles. A recent study reported on by The Detroit News says that Chinese citizens who drive Mercedes models are more likely to be successful, wealthy entrepreneurs, while Cadillac drivers tend to belong to the white-collar working class. The study looked at 800 luxury car owners spread across ten major Chinese cities to get a better idea of who, exactly, is buying up all of those luxury vehicles. The findings indicate that the average luxury car owner is 33.5 years old, and pulls in more than $160,000 annually. While Audi was found to be the most popular luxury brand, the findings do give Cadillac some interesting demographic information on which it can try to capitalize.
Without a doubt, the luxury car segment in China is set to explode. All of the world’s automakers obviously feel it as well, and Cadillac is no exception. As the wealthiest in China tend to flock to Mercedes, Cadillac is certainly in prime position to compete going forward. If the company can add a few more models to the fold that can meet Audi, BMW and Mercedes head-on, GM’s chances for success should only be augmented.
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