General Motors (NYSE:GM) said that its deliveries in China rose 18% to 293,537 vehicles in August, backed by strong demand for the Cadillac, Buick, and Baojun brands. Year to date, GM's deliveries in China are up 8.1% from the same period a year ago.
All of GM's China brands gained ground last month
GM's luxury Cadillac brand posted the biggest year-over-year gain, with sales up 93% from a year ago to 9,914 vehicles. The star here is the brand-new midsize XT5 crossover, which has hit a sweet spot in the Chinese market. Sales broke 3,000 for the first time.
Cadillac's ATS-L and XTS sedans are also finding a lot of new buyers in China. The ATS-L is a longer-wheelbase version of the U.S. market ATS, with more room in the back seat. Sales of the ATS-L also broke 3,000, GM said, while sales of the big XTS were up 65% from a year ago. The XTS has been available in China for a few years now, but sales have jumped in recent months.
Buick has long been GM's best-selling brand in China. Buick deliveries rose 23% in August to 94,188 vehicles. The hot sellers continue to be the Excelle GT sedan (a sibling of the U.S.-market Buick Verano) and the midsize Envision crossover SUV. Envision sales were up 53% from a year ago, GM said.
Chevrolet delivered 38,706 vehicles in China in August, 36 more than a year ago. That's actually a good result for the bowtie brand, which was hurt at the end of 2015 when the Chinese government ended subsidies that had boosted sales of its small Sail sedan. GM's all-new Cruze was launched in China in July, and sales broke 19,000 in August. GM noted that its iconic Camaro muscle car will be launched in China later in September.
The Baojun brand is GM's China-only entry into the affordable family vehicle market segment. It has been quite successful: Baojun delivered a solid 51,099 vehicles in August, up 41% year over year. Its mainstays are the Baojun 730, a smallish minivan or MPV, and the 560, a midsize crossover SUV. The 560 in particular has been a big hit for GM in China since its introduction last year. Sales were up another 52% in August.
The Wuling brand sells small, affordable vans. Its commercial vans were a huge success for GM and its joint-venture partners for a while, but the brand's sales took a hit (along with the commercial-vehicle segment as a whole) as China's building boom stalled. But August was a good month: Wuling deliveries were up 8% to 99,589 vehicles on strong sales of the Hong Guang small minivan family.
Further investments to sustain GM's current momentum
Cadillac's sales numbers in China may seem small in comparison to the mass-market brands, but that's true elsewhere, too: Cadillacs made up just 16,346 of the 256,429 vehicles GM sold in the U.S. last month. But these are high-profit models -- and in China, it's the growth that is significant. The new XT5 is a no-excuses product that compares well with its German rivals. Its early success is a good sign for the brand.
Aside from Cadillac's gaudy growth numbers, GM China president Matt Tsien noted that the company's sales strength is coming mostly from mainstream passenger models right now. He said that GM will be rolling out another five new or significantly refreshed models before the end of the year in an effort to sustain its recent sales momentum.
What it means for shareholders: Is GM offsetting pricing pressure?
Like other global automakers, GM has faced a tougher market in China over the last year. Local Chinese automakers have raised their games, becoming tough competitors in the lower-priced segments. That has put pressure on GM's pricing, and that in turn has dented profits. GM's equity income from its Chinese joint ventures was down about 6% in the second quarter from a year ago.
GM didn't give any details on China pricing in its statement on Tuesday. We may have to wait until its third-quarter earnings report next month to find out if GM is winning these sales gains with aggressive discounts that might hurt profits.
But I suspect that GM's profits from China will be fine. CFO Chuck Stevens said during the second-quarter earnings call that new product launches and increased efficiencies would help it deliver full-year income from China comparable to the $2.1 billion it earned a year ago. August's strong sales gains suggest that GM is one month closer to delivering on that guidance.
John Rosevear owns shares of General Motors. The Motley Fool recommends General 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.