General Motors plans to ‘assemble’ at least three Cadillac cars in China in the next two years, part of its aggressive plans to launch the brand in the fastest growing automotive market in the world, Reuters reported.
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Like its competitors BMW, Mercedes and Audi, GM sees a sizable amount of pent-up demand for luxury vehicles among a growing number of wealthy consumers in China, the report added.
“On top of explosive growth, the desire for prestige products in China makes that market very attractive to us,” Cadillac’s director of global brand development John Howell told Reuters.
The news agency said GM’s Buick division now serves as its premium line in China, but the addition of Cadillac, as well as Saab, will add a higher level of luxury.
Howell told Reuters GM will assemble the Cadillac CTS sedan and the SRX mid-sized SUV at its joint-venture plant in Shanghai next year, and the next-generation Seville, to be called the STS, there in 2005.
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By GlobalDataAccording to the news agency, GM initially will rely on semi-knockdown kits to build the vehicles. The cars will be shipped mostly built, along with a few minor components, from the United States to Shanghai, where the final parts will be added.
With the kits, GM can skirt taxes charged on completely built vehicles, and quickly launch Cadillacs in China without investing in costly tooling and stamping equipment, Reuters noted.
“It’s certainly much cheaper than installing an assembly plant,” Bruce Harrison, a consultant with the Automotive Group of automotive advisers Global Insight, told Reuters, adding: “It gives you a way to get some local content into a vehicle with a limited investment.”
However, China is in the midst of formulating a policy on car production, which some analysts told Reuters will discourage the growing number of makers shipping partially built vehicles to China.
Reuters said Chinese generally associate Cadillac with larger cars, but the mid-sized CTS sedan could appeal to the majority of drivers who are in their 30s and 40s, Tim Dunne, a partner of Automotive Resources Asia in Beijing, told the news agency.
“There may be a room for a smaller luxury car segment to develop, particularly for the children of the wealthy, and perhaps to include the ‘er nai’ (second wife) of rich Chinese men,” Dunne reportedly said.
Reuters noted that Asian newspapers have reported on the growing number of businessmen, particularly from Taiwan, having mistresses or second wives in China.
To broaden the Cadillac lineup, Reuters added, GM will also export some fully built vehicles to China, like the Escalade large SUV and perhaps the DeVille large sedan – a limited number of DeVilles have already been sold in China to test the market.
Later, GM may move to fully manufacture and assemble some Cadillacs in China as its supplier network matures, Howell told Reuters, a step that would require more investment in plant capacity and costly tooling.
The cars will be sold at Cadillac-only dealerships, the first four or five of which are expected to open in major Chinese cities in the spring, Howell told Reuters. Cadillac sales could total several thousand vehicles in China within a year or two, he reportedly added, without providing a specific target.
Reuters noted that GM was criticised when it plunged into the Chinese market in the late 1990s but sales have grown rapidly, and its operations there have been profitable.
The news agency said GM doesn’t disclose earnings from China, but in the second quarter, it earned a record $US163 million in the Asia Pacific region, nearly double the $83 million profit from its core North American automotive operations, where costly consumer incentives hurt results.
