General Motors Co. (NYSE: GM) is making a name for its Cadillac brand in China as one of the more iconic and up-and-coming cars in the People’s Republic. Typically the brand is associated with big names, American celebrities and even U.S. presidents. As Cadillac is making its way in perhaps the world’s largest market, GM is employing a new strategy to capitalize on this exposure.
Just this past December, Cadillac sold more cars in China than in the United States. Also China sales surged 90% in the first quarter of 2017 to roughly 39,400 vehicles, according to GM.
Part of this surge in sales was the result of GM’s newest Shanghai plant that the company opened in the past year. This is GM’s second-newest assembly plant worldwide. The Cadillac factory showcases the company’s most modern production engineering. This plant could mark the turning point in what could soon be Cadillac’s biggest profit center.
According to Automotive News:
Indeed, it is China that is now driving Cadillac toward record global sales. Worldwide volume rose 11 percent to 309,000 vehicles in 2016, Cadillac’s highest since 1986 — and approaching its all-time high of 360,000 vehicles in 1980.
In the 1980s, almost all Cadillac sales came from the U.S. Today, more than a third comes from China. China sales surged 45 percent to 116,000 last year, while U.S. sales fell 3 percent to 170,006 vehicles.
By localizing this production, GM is able to duck China’s 25% import tariff, which helps fight the German competition. Audi, Benz and BMW already own a huge chunk of market share in luxury autos in China.
Looking ahead, between 2020 and 2025, annual luxury-segment sales in China have the potential to top 4 million vehicles, from nearly 600,000 now. In the next three years, Cadillac plans to open 100 dealerships to position itself for the growth.
Shares of GM were trading at $33.35 Tuesday morning, with a consensus analyst price target of $39.90 and a 52-week trading range of $27.34 to $38.55.