General Motors Company (NYSE:GM)’s Cadillac trains sight on tier two markets
Northern, WI 04/22/2013 (gdpwatch) – General Motors Company (NYSE:GM) (Closed: $29.15, Up by 0.59%) has trained its sights on China and plans on more than tripling its sales of the Cadillac luxury brand, by 2015. The largest auto market in the world has been offering more and more competition to international car brands. GM will target affluent buyers in cities that are smaller but where demand is higher. The company’s China head, Bob Socia said that the Cadillac global portfolio will be added to China and right through 2016, GM will add one locally produced model to the market. The Detroit-based carmaker plans on expanding the number of dealerships for this brand up from the 70 outlets that existed in 2011 to 200 outlets in 2013.
Smaller cities calling
Kevin Chen, the general director for the Cadillac division at GM Shanghai said that the market in tier one cities is currently very large and is getting flooded but that there is a high growth potential in tier-two and tier-three cities. Dan Ackerson, the GM Chief Executive Officer’s aim is that the luxury brand should be competitive with Volkswagen AG (PINK:VLKAY) (Closed: $35.41, Up by 2.82%)’s Audi and Bayerische Motoren Werke’s BMW. In order to reach that target, Cadillac will have to narrow the gap with the German luxury marques that currently exist in China. Luxury auto sales are slated to grow over 100 percent by 2020 and will touch three million.
The ideal market
Actor Brad Pitt has been signed-up by GM to add star value to the Brand and attract Chinese customers. In 2015, the company hopes to sell 100,000 a year which will account for 10 percent of the luxury market in China. Socia said that most of the Cadillacs that are to be sold in China will be manufactured locally. This will help in cutting production costs and shield against currency fluctuation in the markets as well. Companies have to pay a tariff of 25 percent on imported vehicles. This automatically makes then less competitive than locally made vehicles. The Chinese auto market has been growing by leaps and bounds. The sheer size of the country, its population and economic advancement makes it an ideal emerging market.