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GM Is Zooming Ahead in China

General Motors' (NYSE: GM  ) biggest success story in recent years has been its rapid growth in China. Despite lacking a "home-field advantage," GM has out-competed other global automakers in China to become the market leader along with Volkswagen.

In fact, while GM still earns most of its profit in North America, the company has sold more cars in China than in the U.S. every year since 2010. This year, GM is poised to hit an even more impressive milestone. GM is on pace to sell 3 million vehicles in China for the first time.

The company's strong momentum in the world's biggest car market is a great sign for investors. China is already a profitable market for GM, and it will become an even more significant profit driver in the next five years.

China growth explosion
GM has expanded rapidly in China over the past decade or so. Ford (NYSE: F  ) has (rightly) been getting a lot of attention for its strong growth in China; its sales have increased 51% year over year through the first nine months of 2013. However, Ford is still a small player there, compared with GM.

Since 2007, GM has gone from selling around 1 million vehicles annually in China to a record 2.84 million last year! That was more than four times as many vehicles as Ford sold in China last year. So despite Ford's torrid growth, it's nowhere near challenging GM or Volkswagen.

Through September, GM's unit sales in China were up 11.1% year over year to 2.31 million. Furthermore, GM sold more than 750,000 cars in China during Q4 of 2012, so the company has already passed the 3 million mark if you look at the past 12 months. If GM maintains its recent sales growth rate through the end of the year, the company will sell approximately 3.15 million vehicles in China in 2013.

Moving up-market
One reason GM's progress in China is so exciting is that the country has a thriving luxury car market, as well as growing demand for mid-range cars. In other words, while China is obviously a high-volume market, it's not just about cranking out cheap cars.

Fortunately, GM's best growth has been in the upper end of the market. While GM's year-to-date sales in China are up 11.1% overall, Buick sales grew by 17.6% and Cadillac sales grew by 51.2%.

Cadillac sales in China have grown more than 50% this year.

Cadillac's strong growth is very promising, although the brand still represents a tiny fraction of GM's China business, with unit sales of 32,238 through September. Earlier this year, GM and its joint venture partner broke ground on a Cadillac assembly plant in Shanghai. By boosting local production of Cadillacs, GM will be able to avoid China's 25% car import tax, which should help GM boost Cadillac sales there. Ultimately, GM's goal is to triple Cadillac sales by 2015 and take 10% of the Chinese luxury market by 2020.

Foolish conclusion
GM's rapid growth in China over the past decade has transformed the company. While its growth rate has cooled off a bit, GM is still racking up impressive gains in China and will almost certainly sell more than 3 million vehicles this year.

Most importantly, GM's higher-end nameplates -- Buick and Cadillac -- have been among its best performing brands in China. GM's plan to boost the profile of Cadillac within China is particularly promising, as the country has a large and growing luxury car market. This could really take the profitability of GM's China business to the next level.

Understand the Chinese auto market
GM has built a strong market position in China, but it's not the only company benefiting from surging vehicle demand there. The Motley Fool's new report on the Chinese auto market is designed to help you understand which two automakers are best positioned to win as China's middle class grows. If you want to be among the smart investors who get rich from this growing trend, check out our free report on the topic by clicking here now.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 13, 2013, at 9:31 PM, shineridge wrote:

    SCREW GM !!!!! Since that SO-CALLED US company got their ILLEGAL bailout (Unconstitutional), I now call GM, Government Motors. Us taxpayers should NEVER be forced to bail out ANY private sector company. PERIOD !!!! And, to my knowledge, taxpayers have not gotten any piece of the profits from GM sales. Also, I understand GM has a number of their FACTORIES in Friggin COMMIE China. Damnit, we need those factories HERE, employing Americans. We have an unemployment rate of 20%. We need JOBS !! SHAME on GM for having plants in China!!!!!!!!!!

  • Report this Comment On October 13, 2013, at 11:39 PM, pwkrp wrote:

    @shineridge, cars mad in China are for their market, not ours in the USA. The profit from sales still comes back to the home base here in the USA. And the bailout keep a lot of people working and small companies going that make pars for GM, Ford, and Chrysler. If the auto makers had went under their would have been more than on million people unemployed collecting unemployment, food stamps and what ever else. That money we would have never recovered. Ford even said if GM and Chrysler had went under it would have caused them to close up also because many of the small companies that build parts for GM and Chrysler build parts for Ford but if those companies are gone who will build parts for Ford to make cars. And how unique calling GM Government motors, are you the first.

  • Report this Comment On October 13, 2013, at 11:42 PM, pwkrp wrote:

    @shineridge, GM and Chrysler paid back the bailout money and now GM is buying it's stock back from the government. So how many cents do they owe you.

  • Report this Comment On October 13, 2013, at 11:59 PM, pwkrp wrote:

    @shineridge, You said you want jobs in America. The bailouts were started in 07 and keep 242K people working in the auto plants plus the vendors working, plus the people who supply to the aug makers. From a show on PBS back in 07 it showed if the auto plants went under with in six months their would be 1.2 million to 1.5 million people out of work. These people pay taxes were they live, shop were they live, it all adds up. Quit thinking about "ME" all the time. We use to work together as a country but now it is all about "ME"

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