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GM Announces China Expansion: Cadillacs to Hit Beijing Streets

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GM Announces China Expansion: Cadillacs to Hit Beijing Streets

On Monday, General Motors Company’s (NYSE:GM) CEO Dan Akerson said that the company will expand its China dealership network by about 600 this year and almost double its production capacity amid slowing sales growth.

At the Beijing auto show, Akerson said, “We will expand our dealer network to 3,500 stores from the 2,900 that we ended up with in 2011. We fundamentally believe in the strength of the Chinese market.”

China is currently the world’s largest auto market as defined by vehicles sold but it has endured a decline in sales growth from 2010’s 35 percent all the way down to two percent in the first quarter. Between government credit and investment controls to slow down the economy, China’s demand for cars has been curtailed.

Also on Monday, Akerson announced that GM plans to increase production capacity by 2016 to 5 million cars per year in China. This is almost double the 2.55 million cars and trucks along with Chinese partners, sold in 2011.

More Luxury Cadillacs to Hit the Crowded Streets

Also disclosed at Beijing’s auto show by Joseph Liu, executive vice president of GM China, said the company plans to introduce one new model from its luxury Cadillac unit each year in China.

Liu noted that the unit is looking to increase annual sales from 2011’s 30,000 to 100,000 in 2016.

In 2012, GM will build the new 2013 Cadillac XTS sedan in China, followed by the ELR luxury electric coupe.

Currently, China is only selling one model, the large-length luxury sedan, the Cadillac SLS; it is built in the country while it imports the CTS, SRX crossover and Escalade from U.S. and Mexico plants, reported The Detroit News.

So how are Cadillac sales in China? It’s going well.

The company began selling them in 2004 and have seen sales go basically from zero in 2007/2008 to 30,000 in 2011. This represented a year-over-year rise of 72.8 percent.

China has focused on the Cadillac luxury model in an effort to keep up with its German competitors for wealthy buyers. At the end of 2011, GM started to plant the seed about its expansion with Kevin Wale, GM’s China boss, saying that he foresaw lots of growth in China–as high as a 40 percent rise in production.

Wale said in a Bloomberg interview, “Luxury-car sales will continue to grow faster than the overall passenger-car market, driven by increasing wealth. The segment is a key area of focus for us over the next three to five years.”

Details were not provided by GM on Monday but it will have a China factory to assemble the Cadillacs. To help with sales, Cadillac will also increase its China dealer network two-fold to 50 in the next year or so according to Cadillac spokesman David Caldwell.

Restructuring Venture with SAIC

GM also briefly discussed a restructured deal with its main Chinese partner, SAIC Motor Corporation Limited (SHA:600104) and the reinstatement of its its 50-50 shareholding relationship “in the near term” according to Akerson.

This comes from GM’s 2009 one percent sale of the company prior to its restructuring during bankruptcy. The transaction enabled SAIC to take a controlling 51 percent share and the right to state the revenues from the venture on its books, according to AP.

Now the two sides will have equally-owned operating unit with a separate sales unit to be created. SAIC will have a 51 percent share, thus enabling it to further state the sales revenue on its books.

Akerson did not provide details on what GM would pay to regain the 50-50 ownership but when it was sold by the company in 2009, it had an $85 million value.

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