After a holiday-induced dip in February, General Motors (NYSE:GM) resumed its sales growth in China during March. Sales by GM and its Chinese joint ventures rose 12.6% in March from a year ago, the automaker said on Wednesday.
With 290,538 vehicles sold, March had GM's second-highest monthly sales total ever in China. It caps a quarter that saw GM's sales rise 9.6% from the year-ago period, to 816,373 vehicles – GM's best-ever quarterly showing in China.
It was a good showing in several areas, including a bright start for one of GM's most important global projects: the elevation of Cadillac -- with some help from Brad Pitt.
A promising start for Cadillac's big car in China
GM said that Chinese Cadillac sales grew 32.2% in March from a year ago. Much of that growth was driven by the new-to-China XTS, Cadillac's biggest sedan, which sold 2,006 units in its first full month in the Middle Kingdom.
That may not sound like a lot, but it's a nice showing by luxury-car standards – for comparison, the XTS sold "just" 3,061 units last month here in the U.S., where Cadillac is much more established. The XTS is GM's current take on the big cushy old-school Cadillac concept, but loaded with advanced technology like a sophisticated all-wheel-drive system and sensor-driven electronic safety features.
That technology has been a big point of emphasis in Cadillac's marketing both here and in China, where GM officials at the February launch of the XTS in Guangzhou called it the most technically advanced Cadillac to date – and where television commercials starring actor Brad Pitt (yes, really) in a white XTS have played up the car's high-tech features.
That's a game that GM will have to continue to raise in China if it wants to meet its ambitious goals for its luxury brand.
A long-range plan facing daunting competition
Technology, along with Cadillac's ever more sophisticated styling, may be GM's best route for expanding Cadillac's appeal in China. The Chinese market for luxury cars has boomed in recent years, but so far it has largely been controlled by the big three German luxury brands.
Volkswagen's (NASDAQOTH:VWAGY) Audi brand, the favored brand of powerful government officials and Chinese bigwigs, led the market with a 29.6% share in 2012. Its German rivals BMW (NASDAQOTH:BAMXF) at 23.6% and Daimler's (NASDAQOTH:DDAIF) Mercedes-Benz at 20.6% were the second- and third-place finishers. The high margins typical in the luxury-car market mean that all three are booking outsized profits from their success in the Middle Kingdom.
Cadillac has been just a bit player in China's luxury market so far, but GM would dearly like a piece of that action. Much of the work being done to refurbish and elevate the Cadillac brand is being done with China in mind. GM outsells VW in China, but its profits from the region trail its German rival's by a wide margin, and the success of Audi is a big reason why. The project to turn Cadillac into a worthy competitor to the German luxury brands is an important part of GM's strategy for closing that gap.
But patience will be required, and with the German brands already so well-established, GM is being realistic. Shanghai GM president Ye Yongming said at the XTS launch ceremony that GM expects Cadillac to sell 100,000 vehicles a year in China by 2013 and to have 10% of China's luxury-car market by 2020, China Automotive Review reported. GM sold about 30,000 Cadillacs in China in 2012
If GM continues its already impressive efforts to improve Cadillac's products, that goal should be attainable. The early success of the XTS is a good sign.
Fool contributor John Rosevear owns shares of General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends BMW and 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.