General Motors (GM 0.87%) said its sales of Cadillacs in China jumped 65% in May from a year ago. It was the 15th month in a row of year-over-year sales increases for GM's luxury brand in the world's largest new-car market.

The results helped the Cadillac brand to a 34% global increase in sales last month. GM's overall sales in China were roughly flat in May from from a year ago.

A dark red Cadillac XT5 crossover SUV.

The Cadillac XT5, introduced in the U.S. and China last year, has been a strong seller. GM sold over 5,000 in both the U.S. and China last month. Image source: General Motors.

Cadillac is becoming a nice story for GM in China

Though May, Cadillac sales in China are up 85% from the same period in 2016. That gain is being driven by the success of three models:

  • The midsize XT5 crossover SUV has been a big hit since its introduction last year. GM sold over 5,000 XT5s in China in May, nearly as many as it sold in the U.S. last month (5,752). 
  • Sales of the big XTS sedan have been consistently strong and growing as more Chinese consumers become familiar with the Cadillac brand. XTS sales rose 45% in May from a year ago.
  • The ATS-L is a China-only version of the compact ATS sedan. It has a longer wheelbase than the U.S. version, which gives it more room in the back seat. That's crucial in China, where luxury-car owners often hire drivers to deal with the heavy traffic in and around cities like Beijing and Shanghai. ATS-L sales nearly doubled in May from a year ago, the model's 11th consecutive month of double-digit percentage sales growth.

GM sold a total of 14,154 Cadillacs in China in May. That's more than the 13,211 it sold in the United States last month.

The rest of GM's China lineup had mixed results in May

Overall, GM sold 294,425 vehicles in China in May. That was down slightly (0.3%) from a record result in May of 2016. GM's Chevrolet and Buick brands have both seen sales slip in China this year, a result of lower demand for small cars in the wake of a reduction to a government incentive program. 

(The Chinese government has long offered a tax incentive on vehicles with smaller engines, but the amount of that tax break was cut in half as of January 1. A lot of buyers rushed to buy before the change, so small-vehicle sales boomed late last year, but have slumped since.)

A 2017 Buick GL8 Avenir minivan. The special purple color is exclusive to Avenir-trim models.

The Buick GL8, shown here in upscale Avenir trim, is a premium minivan sold only in China. Sales rose 78% in May from a year ago. Image source: General Motors. 

How GM's brands fared

Here's how GM's China brands (aside from Cadillac) fared last month.

  • Buick is still GM's best-selling brand in China, but its sales fell 6.8% from a year ago to 94,023 vehicles last month. The compact Excelle family of vehicles is suffering, but Buick is seeing strong sales of its Envision SUV and of the GL8, a China-only premium minivan. The big Buick LaCrosse sedan is also doing well, with over 7,800 sold in China last month (versus 3,183 in the U.S.).  
  • Chevrolet sales fell slightly (about 1%) to 37,751 sold in China in May. Again, sales of its smallest models have suffered, but Chevy is making up most of the lost ground with strong sales of larger (and more profitable) sedans: Malibu sales rose 36% from a year ago. GM has just begun rolling out the all-new Chevy Equinox crossover in China, and said it sold "nearly 4,000" in May, its first full month on the market.
  • Baojun is an affordable China-only brand intended to compete on price with domestic Chinese automakers while offering GM quality. It has been a big success for GM: Sales rose 47% to 64,075 Baojuns sold in May. The small Baojun 510 SUV has quickly become a big seller: over 23,000 were sold in May.
  • The Wuling brand is in the process of shifting its focus from small vans for commercial buyers to a similar-but-different market: small minivans for young families. It delivered 84,602 vehicles in May, down 19% from a year ago.

Through May, GM's sales in China are down 3.7% this year from the same period in 2016.

The Baojun 510, a compact SUV made by GM for the Chinese market.

The small Baojun 510 SUV has been a big hit for GM and its joint-venture partner in China. Image source: General Motors.

How this market is likely to affect GM's profits

China is very important to GM's bottom line. GM's Chinese joint ventures generated $504 million in equity income in the first quarter, down less than 3% from the first quarter of 2016 despite a 5% year-over-year drop in sales.

The story of the first quarter was that GM's overall sales totals were down, but it sold a richer "mix" of vehicles -- more SUVs and larger sedans, fewer small cars. Two months into the second quarter, the pattern is holding: GM's sales in China were down about 1.1% in April and May combined from the same period in 2016, but it appears to be selling a significantly larger percentage of SUVs, crossovers, larger sedans -- and high-profit Cadillacs -- versus its mix a year go.

Long story short: GM's sales in China may be down, but it's once again on track for a strong profit in the second quarter, thanks in part to its old luxury brand.