The market for luxury cars in China is one of the fastest-growing -- and most lucrative -- automotive markets in the world. China's wealth explosion has led to white-hot demand for Western luxury goods of all kinds, from Rolex watches to top-shelf champagne. Luxury cars are no exception.

With its long-established position as the top-selling automaker in China, General Motors (NYSE:GM) might seem to be in a great position to take a lead in this immensely profitable market. My Foolish colleague Daniel Miller recently made just that argument.

But I don't think so. As I see it, GM is going to have to make a massive effort if it wants to gain significant ground in China. That effort will cost billions of dollars, and take (at least) several years to bear fruit.

And even then, it might be hopeless, because the competition is already well-established.

Sure, GM can beat Toyota and Ford, but...
Daniel (rightly I think) dismissed potential challenges to GM from the likes of Toyota and Ford (NYSE:F). While Toyota's Lexus brand is a well-established and credible luxury competitor in other parts of the world, lingering anti-Japanese sentiment from last year's China-Japan territorial clash continues to hurt Toyota's China efforts across the board.

In some ways, Ford is a more serious threat. While the Blue Oval, which got a very late start in China compared to its biggest global rivals, has nothing like GM's presence in the Middle Kingdom, it does have some top-notch products going for it -- and those products are proving to play well with Chinese consumers. Already, the Ford Focus is one of China's top sellers, and the Escape SUV -- called the Kuga in China – has been climbing the charts since its introduction a few months ago.

Ford is doing well in China by positioning its well-equipped mainstream models as premium offerings. But, true luxury cars are something else. While Ford is making a big effort to resuscitate its laggard luxury brand, Lincoln, that effort could take years to gather steam. Even then, it seems pitched more at the Japanese luxury brands rather than at the real global luxury heavyweights that dominate the market in China.

It's those heavyweights -- the big three German luxury carmakers -- that stand between GM and success in China's luxury-car market. And they represent a huge obstacle: All three are formidable competitors and, to put it simply, GM isn't yet in a position to confront them directly.

The German luxury leaders are another matter
Why will it be a challenge for GM to confront the Germans in China? For one thing, they already pretty much own the market: In 2012, BMW had a 23.6 percent share of China's luxury car market, Daimler's Mercedes-Benz brand had a 20.6 percent share, and Volkswagen's Audi brand had a whopping 29.6 percent share.

That's almost three-quarters of the market right there. As for GM's luxury brand, Cadillac? It's barely on the charts, selling just a few thousand vehicles in China every month.

So how can GM up its game? First and foremost, GM needs the product. The problem right now is pretty simple: Cadillac doesn't have very many cars that can go toe-to-toe with the best from its German rivals. In fact, at the moment, I'd argue that it has exactly one, the ATS compact sedan that debuted last year.

The ATS is a really good car, perhaps GM's best product of any kind at the moment. It isn't a significant part of GM's China offerings yet, and won't be until Shanghai GM starts making it locally late this year. At that point, it stands a pretty good chance of gaining some ground on BMW's 3-Series and Audi's A4, just as it is doing here in the U.S.

But GM is going to need a lot more than the ATS – which is really an entry-level luxury car -- if it's going to be a significant luxury player in China.

A Cadillac renaissance is coming, but slowly
Like most automakers, GM's future product plans are largely secret. But the company is widely believed to be working on a "flagship" Cadillac, previewed by 2011's Ciel concept car: a big, powerful, opulent luxury sedan that can go toe-to-toe with the Germans' best, the Mercedes S-Class, Audi A8, and BMW 7-Series, with no excuses.

That's the car that Cadillac needs to be in order to be taken seriously as a global luxury player. And it's not even a sure thing: It could cost a billion dollars or more to develop, a number that is said to have given GM's board some pause.

Why so expensive? Such a car requires the development of a major new rear-wheel-drive platform, said to be code-named "Omega," which could eventually serve as the basis for several high-end Cadillacs designed to confront the Germans head-on.

The key word there, though, is "eventually." Analysts don't expect the first Omega-based Cadillac to appear much before 2015. And, even then, it could take a few years (or more) of careful marketing before the high-end Cadillacs are taken seriously as direct competitors to the Germans, in China, or anywhere else.

Cars like the ATS are laying good groundwork. The all-new mid-sized CTS, which is set to be revealed later this month, is said to share the ATS's basic framework. If it's as well-executed as the ATS (and that's still something of an "if" – this is General Motors, after all), it should be a solid competitor for the Mercedes E-Class, BMW 5-Series, and Audi A6.

The upshot: A long, slow, uncertain process
As the ATS and all-new CTS hit the Chinese market over the next couple of years, Cadillac's sales should pick up steam. But, without a credible entry at the top of the line, Cadillac is unlikely to be taken seriously as a peer of the Germans by tastemakers in China (or elsewhere). Without street cred, Cadillac won't be a major player in this market.

Even once those top-of-the-line cars appear (assuming that they do), Cadillac will face an uphill battle to reclaim its long-lost title as the "Standard of the World." Years of careful marketing may be required and, even then, GM may have to settle for third or fourth place.

Meanwhile, VW will be selling an awful lot of Audis, and making an awful lot of money, in China.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.