Why Is Cadillac Selling Slower Than Molasses In China, And What Is GM Doing About It?

Cadillac increased sales in China by 73 percent last year. That sounds like an astounding success… until we realize that sales totaled 30,000 units for the year, or about 2,500 a month. Compare that to Cadillac sales in the United States, where the Wreath and Crest brand manages to move more than 10,000 units every 30 days, and the 73 percent jump in sales no longer looks like a great number… especially considering that it’s the über-market-where-everything-sells-in-big-volumes China we’re talking about. Add to that the fact that Audi — the luxury sales leader in China — sold 308,808 vehicles in 2011, effectively increasing its year-over-year sales by more than the total amount of Caddys sold, and the situation of GM’s top-dog brand becomes rather grave.

One of the problems is the lineup. In China, Cadillac only sells certain variants of the CTS line (CTS Sedan, CTS Coupe, CTS-V Sedan), the SRX, Escalade, and SLS. Clearly, the new wave of products — including the XTS, and all-new ATS and CTS lines — will remedy that within the next two years. But therein lies the rub: Cadillac lacks local production — which results in its vehicles being more expensive than those made locally by the competition.

Currently, China slaps hefty tariffs on imported cars — and all but one Caddy is imported from outside the country. The one car that’s built locally is the Chinese-market-exclusive SLS, which is a stretched (by four inches) STS sedan. Importing to China drives the prices of Caddys way, way up. For instance, the CTS Sedan is taxed so highly, that it’s priced at $71,000 (448,000 RMB) and costs more than the larger and more luxurious SLS, priced at $61,555 (388,800 RMB). That’s over $70,000 for a CTS, a vehicle that has a starting price of $35,000 in the U.S. Compare that to the locally-built A4, with a starting price of $43,000 (272,800 RMB), or the $60,000 (383,000 RMB) price tag for the A6L — the direct competitor to the SLS — and the effects of the tariffs become crystal clear.

Some other interesting pricing variations include the CTS-V Sedan at $174,000 (1,100,000 RMB) and the Escalade, at $251,931 (1,588,000 RMB). Another glaring example of the effects of the import tariffs is the SRX midsize crossover, which makes up the bulk of Caddy’s Chinese sales. It costs $68,000 (429,800 RMB), considerably higher than the (smaller) but equally competitive offering from Audi — the Q5, which is priced at $60,700 (383,600 RMB).

Thankfully, GM is addressing the issue of local production, and will begin manufacturing Cadillacs in China — for China — this year starting with the XTS. The ATS will follow in early 2013, and the CTS — thereafter. At the time of publication, no plans have been publicized to make the SRX locally, but Dan Akerson confirmed that Cadillacs will be made in their own plant, rather than sharing facilities with other GM brands; unfortunately, he didn’t share more details.

Ultimately, Cadillac has set out a goal to increase sales from the current 30,000 units a year to 100,000 by 2016 — an objective that will be met by revamping its lineup with the ATS, new CTS, XTS, and even the ELR, manufacturing locally, and expanding its dealer network from 69 stores (at the end of last year) to twice that in 2012. By comparison, Cadillac had 11 stores in China at the end of 2006.

Will Cadillac be able to reach 100,000 annual sales by 2016? Something tells us that the answer to that question is booming “yes”.