Tesla Motors Inc. and General Motors Eye Growth In the World's Largest Automotive Market

The competition is heating up between automakers in China.

Apr 21, 2014 at 3:00PM
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The Dow Jones Industrial Average (DJINDICES:^DJI) was trading 42 points higher, or 0.26%, at 3 p.m. EDT as the market awaits quarterly earnings reports from some big-name companies this week, including Ford, General Motors (NYSE:GM), Boeing, and Caterpillar.

"There have been some strong results from prominent companies, but in general the season has been less than exciting," said Paul Nolte, portfolio manager at Kingsview Asset Management, according to Reuters.

As earnings season continues forward in high gear, here are a couple companies making headlines today.

General Motors' earnings will be much less profitable due to a $1.3 billion charge associated with its massive recall debacle this year. Aside from that ugly headline number, GM announced plans to invest $12 billion in China from 2014 to 2017 to strengthen its competitive position in the world's largest automotive market.

General Motors plans to build five more plants in China next year and is on pace to accelerate its production capacity by 65% in the nation through 2020. One of the new plants will help produce GM's luxury Cadillac sedans. Cadillac is expected to reach 100,000 sales in China next year, which is double its roughly 50,000 sold in 2013.

"Cadillac's growth is on the launch of new products. We launched the XTS, which allowed us to get to the 50,000 levels. This year, we will launch another significant product and next year, we will launch another," Matt Tsien, president of GM China, said according to International Business Times.

For GM shareholders, having Cadillac's sales in China double within two years would be great news. A successful luxury brand is almost a necessity in today's automotive industry, as the sales rope in higher transaction prices and healthier margins. 

Model S Photo Gallery

Tesla's Model S has big potential in China. Source: Tesla Motors.

Another automaker eyeing growth in China is Tesla Motors (NASDAQ:TSLA), which plans to produce cars in the nation sooner rather than later.

"At some point in the next three or four years we'll be establishing local manufacturing in China," Tesla CEO Elon Musk said, according to Bloomberg. "China is very important to the future of Tesla. We're going to make a big investment in China in terms of charging infrastructure."

Producing vehicles in China will enable the company to avoid the country's 25% import tariff. Tesla's Model S cars are today priced at about $118,000 in China, compared to roughly $71,000 in the U.S. market, due to charges associated with shipping vehicles into the country. 

China is behind on its goal to reach 5 million alternative-powered vehicles by 2020. If Tesla can build out its charging infrastructure and bring its vehicle prices down, the world's largest automotive market could be extremely lucrative for the company and its shareholders.

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Daniel Miller owns shares of General Motors. The Motley Fool recommends General Motors and Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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