General Motors (GM 1.98%) said that its sales in China rose 6.3% from a year ago, a good result in a month in which some key rivals lost ground year over year. For GM shareholders, it's especially good news: GM's sales gains in China are being driven by strong demand for some of its most profitable products.

A dark red Cadillac XT5 on a road near a rocky hill.

Chinese demand for Cadillac's XT5 crossover SUV continued to be strong in July. Image source: General Motors.

Chinese luxury-car buyers continue to flock to Cadillac

GM's luxury Cadillac brand has turned into a key driver of sales growth in China. The brand sold 12,006 vehicles in China last month, an increase of 37% from a year ago. (For comparison, GM sold 11,227 Cadillacs in the U.S. last month.) 

As in the United States, Cadillac's new-last-year XT5 crossover SUV has been a big seller, with over 4,000 sold in China in July. Other big sellers in China: a locally made extended-wheelbase version of the compact ATS sedan, called the ATS-L, and -- increasingly -- the big, plush, and expensive CT6 sedan. 

Year to date, Cadillac's sales in China are up 69%.

SUVs are also a GM strength in China

GM has said that it expects its revamped lineup of crossover SUVs to drive sales growth in the latter part of 2017. We saw signs of that happening in the U.S. last month, and it's happening in China, as well:

  • The compact Buick Envision, new last year, sold more than 13,000 units in China in July.
  • The affordable Baojun 510 SUV has been a monster hit for GM since its introduction last year. That continued in July, with over 27,000 sold.
  • The all-new Chevrolet Equinox, a brand-new offering for GM in China, sold 3,500 units in its third month on the market. The Equinox has the potential to be another big hit for GM in China, but it may take some time to get traction in the market.

Buick continues to be GM's biggest-selling brand in China. Overall Buick sales rose 4.4% last month, led by a 19% increase for the Excelle GT sedan. The Excelle GT, a mechanical sibling of the now-discontinued U.S.-market Buick Verano, is Buick's best seller in China, with over 37,000 sold in July. Other strong-selling Buicks: The big LaCrosse sedan (sales up 77% to almost 7,000), and the revamped-last-year GL8 minivan (sales up 55%). Year to date, Buick sales are down 6%.

Chevrolet's China sales rose 23.8% in July, a welcome development driven by strong ongoing demand for the midsize Malibu sedan, sold in two separate versions in China. Also selling well: An affordable China-only compact Chevy sedan called the Cavalier, built on the architecture of the prior-generation Chevrolet Cruze. The Cavalier competes directly with a similar Ford Motor Company (F 6.10%) compact sedan called -- in another nod to history -- the Escort.

A brown 2017 Chevrolet Cavalier with a Chinese-language license plate, driving on a road near a wooded field.

The China-only Chevrolet Cavalier, an affordable compact sedan introduced last fall. Image source: General Motors.

GM's affordable Baojun brand continued its rapid growth. Priced to compete with domestic Chinese automakers, but backed by GM's status as a global automaker, Baojun has found a winning formula with Chinese buyers looking for affordable, but dependable, vehicles. Sales rose 61% in July to over 71,000 vehicles, driven by the 510 SUV and good results for the smaller 310 model. Also new for Baojun: the E100, an affordable all-electric commuter car. 

GM's Wuling brand has been in transition. For years, it sold inexpensive small commercial vans to tradespeople, a business that declined with the end of China's building boom. It's now focusing on revamped passenger versions of those vans, marketed to young families under the Hong Guang nameplate. 

Wuling's sales are still down significantly from a year ago -- a 25% decline last month, down 18% year to date -- but the Hong Guang models are doing well and should deliver higher profit margins than the bare-bones commercial vans they're based on. 

An orange Baojun 510 compact SUV, at speed on a country road.

The Baojun 510 SUV has been a huge seller for GM in China since its introduction. Image source: General Motors.

The bigger picture: GM is recovering from a weak start to 2017

GM's sales in China have been strong recently, a turnaround from earlier in 2017. Small-car sales suffered early in the year after the Chinese government increased taxes on vehicles with engines smaller than 1.6 liters on January 1. Year to date, GM's sales in China are still down slightly (1.3%) from the same period in 2016, but the year-to-year sales gap has narrowed considerably over the last few months. 

The tax increase hit some of the global automakers harder than others: While rivals Honda and Toyota have seen China media rise 18% and 6%, respectively, this year, Ford has struggled with its China sales, down 7% both in July and for the full year to date.

Despite the sales struggles and ongoing pricing pressures at the lower end of the market, GM's China profits have remained strong. GM earned $509 million in equity income from its Chinese joint ventures in the second quarter, up from $471 million in the second quarter of 2016. 

What's behind the increase in profitability? Those Cadillacs, crossovers, and big Buicks, like the LaCrosse. With sales of those products continuing to be strong, GM is on course for another good quarter in the Middle Kingdom.