General Motors’ prestige-luxury brand, Cadillac expects to increase its sales in China by 25 percent this year to over 100,000 units, Cadillac President Johan de Nysschen shared in a recent interview with Reuters.
In January, Cadillac commenced production of its CT6 full-size flagship sedan at a new factory in China. The CT6 joins the XTS and long-wheelbase ATS (called ATS-L) as the third Cadillac produced in China for sale in the local Chinese market.
“China is a very important part of the globalization of Cadillac, and we actually seek to establish China as a substantial second volume hub for the brand,” de Nysschen said.
de Nysschen believes that the possibility of China overtaking the U.S. as Cadillac’s top sales market is “a long way off”, possibly five to 10 years. That’s understandable, given that Cadillac sold 175,267 new vehicles in the United States in 2015, nearly twice the amount it plans to sell in China this year.
Stiff Competition
In China, Cadillac faces stiff competition from well-established luxury brands from Germany — BMW, Mercedes-Benz, and Audi. Together, these brands account for the overwhelming majority of sales and, by association, market share.
Next Up: 2017 Cadillac XT5
Following the introduction of the 2016 Cadillac CT6, Cadillac will introduce the 2017 XT5 midsize crossover. Like the CT6, the XT5 will be built locally in China for the Chinese market. The brand plans to launch four additional models in China by 2020, thereby doubling its locally-produced product offerings, said de Nysschen.
Post-CT6 And XT5
Going forward, de Nysschen explains, Cadillac plans to expand its product portfolio and “aggressively’ localize production. The new production facility, which currently only builds the CT6, can be expanded to produce 150,000 vehicles a year.
Importing Not A (Viable)Â Strategy
In China, Cadillac vehicles are manufactured and sold through a joint venture with Shanghai Automotive Industry Corp. (SAIC). Chinese commerce regulations require foreign automaker to form joint ventures with local automotive firms to produce vehicles inside the country. By contrast, importing vehicles into China results in high tariffs.
GM has been importing the majority of Cadillac vehicles into China since commencing operations in the country, resulting in higher prices for the vehicles compared to the competition, sometimes by as much as 50 percent. The circumstance priced the vehicles out of the range that most Chinese luxury car buyers were willing to pay, thereby pushing them to Cadillac’s rivals from Germany.
Comments
The 100K unit goal is completely attainable with the addition of the CT6 and XT5 this year.
As the article points out, government tariffs on imported vehicles can push the price of that vehicle to over 50% higher than a comparable model of a locally produced manufacturer. That makes that vehicle completely non-competitive. You might as well not sell it.
It actually shows the strength of the Cadillac brand in China that even though the majority of the models are imported and face stiff tariffs they Cadillac has managed to grow the brand yearly since commencing operations in China.
Has anyone ever compared the cost to produce the same vehicle in China versus the US ? Just how much more money is GM making by producing the same model over in China just for that market ? It’s a prime example of just how unfair our trade policys are .
I am certain that cost benefit analysis has been done by GM but unlikely to be divulged to the general public just like GM would not make public what it costs them to produce any of their vehicles at any facility.
Also, regardless of the manufacturing cost difference, as soon as GM/Cadillac has to add a 50% tariff that product becomes noncompetitive leaving the only viable decision, produce the vehicle locally.
I agree with the unfair trade regulations for certain markets, however GM and other companies have to play by their rules if they want to play in that market.
GM PDT the variable production costs (those without R&D and tooling) are not that far apart, as quality production in China has been getting more and more expensive. The primary reason that Chinese-market products are made in China is due to the very heavy, nay — sumo-like tax on imported vehicles. Make a car in the U.S. and import it into China and you immediately price yourself out of the market/segment thanks to the tax.
That said, I do agree about the unfairness in trade regulations. What should be done, in my opinion, is an industry-wide campaign by non-Chinese automakers in China to change the regulations and tariffs. And if the U.S. really wants to keep local manufacturing, perhaps it should consider imposing a similar tax on imported vehicles as China does today.