By on June 19, 2013

Cadillac China - Picture courtesy automoblog.net

When GM announced last week that it wants to increase Cadillac’s share of the global luxury market from 8.5 percent now to 9 percent by 2016, we opined that from “looking at the plan, GM appears to be betting big on the success of its new Chinese assembly plant.” It turns out that Cadillac is betting big on China. Cadillac “aims to quadruple its share of China’s luxury auto market to 10 percent by 2020,” Reuters reports today.

By 2020, GM is “targeting about 250,000 luxury car sales in China,” says Reuters. It will be rough.

premiumbrandschina

China is an astoundingly sophisticated and well-informed market when it comes to cars. When I came to China first some 10 years ago, I was amazed to see internal Volkswagen platform codes being routinely bandied about in the media. I helped a bit with the 2006 launch of the Magotan in China, to learn to my bafflement that media and the masses called it the “Passat B6” as opposed to the Passat B5 that was built by Shanghai Volkswagen.

China bypassed the buff books completely, the Internet car sites are huge and influential, and they read all the foreign sites.

Chinese car buyers, especially those interested in the higher segments, are well informed, and recently well traveled. They know that in terms of premium marques, it’s the Germans that rule the world. GM’s Susan Docherty was right when she said: “If a luxury brand is successful in Europe, whether that brand is Chanel or Prada, or Mercedes or BMW, people in parts of Asia look to see what Europeans validate as true luxury.” This thinking will strongly limit Cadillac’s chances in China, unless there is a serious change of mind.

In China, Cadillac is a relative nobody. “German luxury nameplates accounted for 80 percent of premium car sales in China last year,” says Bloomberg, “with the remaining shared by other European, U.S. and Japanese brands.”  Audi is the absolute ruler of the premium segment in China, with BMW, up 40 percent in 2012, catching up quickly. Mercedes sales were more or less stagnant – proof that even a Benz has to work hard in China.

Absolutely stagnant was Cadillac. For 2012, GM reported sales of 30,010 Cadillacs in China, two (2) more than in the year before, and we won’t be surprised if the numbers received one of those well-known Chinese massages to finish at a not totally unhappy ending.

McKinsey’s predictions for the premium car market

The design of the Caddys did not help much to wean Chinese away from their love affair with German premium brands. Caddy’s “edgy new designs, with sharp creases and flat planes inspired by U.S. stealth fighter jets, have failed to impress China’s wealthy car buyers who have voted with their wallets in favor of smoother-looking European rides,” says Reuters. Made in China designs have been toned down and rounded off a bit.

Cadillac’s all-out attack on China, and the optimistic market share targets have the smell of desperation. Premium class buyers are conservative and have a high degree of brand loyalty, which – just ask Audi – can take many decades to dislodge. GM is probably listening to consultants who promise that the young affluent of China have a more open mind. They sure do: They buy BMWs while the older buy long wheelbase Audis.

Brand-wise, Cadillac is a disaster abroad and has seen better times at home. Nevertheless, China is a (in my view, very slim) chance that simply must be taken for Cadillac. Currently the world’s second largest market for luxury cars, China is projected to overtake the U.S. by 2020. If you can’t make in there, you won’t make it anywhere.

 

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15 Comments on “Hail Mary: Cadillac Bets Big On China...”


  • avatar
    deanst

    What is the reference for the premium car market outlook?

  • avatar
    Hummer

    Wait, caddy is trying to mimic stealth fighters with their cars?

    I need to update myself on what fighter jets look like these days, didn’t know they had changed to the shape of potatoes.
    If their trying to pass off performance and size lacking vehicles like the ATS onto the Chinese, then yea it would make sense why they wouldn’t want them.

    GM has been playing catchup and they have definitely improved a lot, but in some places gone much to far, 2.0 in an American luxury car? Gimme a break, and a v8 while we’re at it.

    Caddy needs a revolution like the late 50s early 60s cars, stop passing off potatoes onto consumers.

  • avatar
    threeer

    Now if China would see fit to reduce their horrid 25% import tariff, MAYBE Americans could produce those Caddys and sell them in China. Nah..you’re right…will never happen…

  • avatar
    rpol35

    Just because Cadillac hasn’t worked out so far doesn’t mean they won’t in the near future. Explain Buick; the models & styles sold in China are completely different than those sold in N.A. and outsell their N.A. counterpart by a significant volumes. Perhaps Cadillac will do the same, who knows?

    Building a plant and making an attempt to enter a market in a larger
    fashion is a worthwhile endeavor and a small investment in the scheme of things for a global auto manufacturer. Especially if the goal is to build a focused or unique product that the local or national market desires. I don’t recall that Cadillac’s goal is to simply kick out ATS, CTS & XTS models in China.

    To your point, Audi should have dried up and blown away long ago and probably been indicted for building complete crap year after year; they were their own worst enemy. But they didn’t give up, they finally figured out a path to success and are now positively recognized internationally for the product that they build.

  • avatar

    Hasn’t Nissan been saying that they want Infiniti to have 10% of the China lux market by 2016? Cadillac might actually hit their goal without resorting to a CLA-type model that waters the brand (speaking of luxury-car-maker moves that reek of desperation); Infiniti has no chance.

    You keep dismissing GM (once a VW man, always a VW man, I guess), but they keep executing pretty well, in China and elsewhere. We shall see.

  • avatar
    NN

    The plant in Shanghai has only been producing the XTS for a couple of months now and it’s selling in similar numbers there as it is in the US. All other Cadillacs now are imported and extremely expensive compared to the German makes who assemble the volume models in china. Cadillac sales are up almost 100% these past couple months in China. They will not challenge Audi anytime soon, if ever, but by sheer numbers in China alone Cadillac could match what they sell here in the US.

  • avatar
    Sundowner

    Bertel keeps noting that the premium car brands have the best loyalty.
    i’d like to see some back-up numbers. I thought Ford and Kia had the best loyalty and even the premium BMW/Audi are only in the 30% range. that’s a lot of wiggle room…

  • avatar

    GM would be wise to stop selling Caddy’s in China. tell them they can’t have them and watch the demand spike. promote Cadillac elsewhere but not in the Middle Kingdom. if we manufacture them there, make it only for export, it will drive them silly. doing so will make the car desirable beyond any push marketing. meanwhile, focus all energies on the Buick brand where there’s a foothold and immediate opportunity for growth.


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