The success story continues: General Motors (NYSE:GM) reported another month of strong sales gains in China, now its largest market.
GM said on Monday that its sales in China were up 15.3% in April versus the year-ago month, with sales of 261,870 vehicles. That was GM's best April ever in China – and for its Cadillac brand, its best month ever.
Buick and Chevy continue to do well
GM has been on a roll in China, even as China's overall auto market has been somewhat sluggish. GM is China's sales leader, with its success fueled by a mixture of familiar Chevys and Buicks – and a wildly popular line of small commercial vans sold under the Wuling brand.
Those little vans account for over half of GM's sales in China, but its more well-known (to Americans, anyway) global brands are growing more rapidly right now.
Somewhat surprisingly to Americans, it's Buick that leads the way in China. The brand is a longtime Chinese favorite, in part because the last Chinese emperor drove a Buick. And it's still growing: Buick's China sales were up 23.9% in April, paced by a strong result for the Excelle XT and GT models, which were up almost 54%. The two are close relatives of the U.S.-market Buick Verano.
Chevrolet sales in China were up 21.7% in April, led by the Cruze. The Cruze has rapidly become Chevy's sales leader in China – just as its American-market rival, Ford's (NYSE:F) Focus, has become the Blue Oval's big seller in the country.
Cadillac growth shines as the brand gains momentum
But for GM investors, the big story has to be Cadillac. GM is mounting a multi-year global push to turn Cadillac into a true rival to the German luxury brands, and China figures very prominently in GM's plan. Cadillac got a very slow start in China, but GM is hoping to have 100,000 sales a year by 2015, and 10% of China's luxury market by 2020.
The brand's sales are small relative to its more mass-market peers – just 30,000 in China last year – but they're of outsized importance to GM: Cadillacs, like other luxury cars, have much higher profit margins than mainstream brands. That makes the brand especially important to GM CEO Dan Akerson's high-priority effort to improve GM's profitability.
Those efforts are already picking up steam in China, where the big XTS sedan just went into production. GM sold 1,802 of the big Cadillacs in April, and that plus the continued success of its SRX crossover pushed the brand to a 99% year-over-year gain for the month.
Investing for even bigger growth in years to come
GM and its joint venture partners sold 2.8 million vehicles in China last year. GM executives hope to push that to 3 million this year – and to 5 million a year by the end of 2015.
GM is spending big to make that happen – an $11 billion investment in a series of new factories and facilities. That investment will be funded with revenues from GM's current joint ventures in China.
If GM's strong sales growth in China continues, those new factories will pay for themselves sooner rather than later – and then some.
Motley Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. 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.