GM Plans to Pour $12 Billion Into Cadillac Brand

Cars and Drivers

Published: January 12, 2015 12:45 pm

Last Updated: April 27, 2020 10:16 pm

Over the next five years, General Motors Co. (NYSE: GM) plans to spend more than $12 billion developing its luxury Cadillac brand, with high hopes of creating new sales in the United States and China. While the United States still leads in luxury car sales for makers like BMW, Mercedes, Porsche and Audi, China is where the focus is most likely to be.

In December, GM sold 357,375 vehicles in China, a year-over-year jump of nearly 32% for the month. The huge increase followed two months of growth in the mid-single digits, so the surge was particularly welcome. GM announced a plan last year to invest $14 billion in China through 2018 to open five new manufacturing plants and to launch up to 60 new or refreshed models.

According to a report in The Wall Street Journal, GM plans to announce on Tuesday that its investment in Cadillac will lead to eight new vehicles. The company’s head of Cadillac sales said:

Eight new products have already been approved. Five are all new and there are two more right on the horizon and I am trying to pull [their introduction] into this decade. At this moment they just squeak out on the other side.

The focus of the new vehicles is developing China as a “second volume hub” for Cadillac. That will not be easy.

Cadillac sold just 73,500 units in China in 2014, a year-over-year increase of 47%. By introducing new models and building them in China, Cadillac avoids the high tariffs that China imposes on imported cars.

ALSO READ: Cadillac Sales Drop 11% as Brand Stumbles

Mercedes sold 281,588 vehicles in China last year, some 20,000 more than it sold in its home country. Sales rose 29% year-over-year.

BMW sold 455,979 vehicles in China, combining sales of the namesake and MINI brands, with sales rising 16.7%.

Volkswagen’s Audi division sold 578,900 cars in China in 2014, up 17.7%, the first luxury carmaker to deliver more than half a million cars in a single year to buyers in the Middle Kingdom. The Porsche division delivered 46,900 vehicles to buyers in China in 2014, up 25.4% year-over-year.

China’s market for luxury cars is large and could get much larger, but overall sales growth has slowed in the country. Restrictions on automobile purchases have gone into effect in several large cities in an effort to reduce the amount of air pollution.

In the United States, Cadillac sales fell 6.5% in 2014 to 170,750 units, well behind Mercedes, BMW and Audi. GM will need to beef up domestic Cadillac sales, as well as develop sales in China, if the company wants a payoff equal to the amount of its investment in Cadillac and China. Neither part of that will be easy.

ALSO READ: 9 Cars That Disappeared in 2014

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