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GM investing billions in China to tap lucrative luxury car market

General Motors breaks ground on new $1.3-billion Cadillac, R&D facility in Shanghai, China.

Gm investing in china cadillac 06 19Enlarge
Chinese officials and GM executives, including CEO Dan Akerson, lay a foundation stone at Shanghai GM's new Cadillac plant on June 19, 2013. (General Motors/Courtesy)

General Motors has chosen the world’s second-largest luxury car market — China — to pit itself against automakers from Japan and Germany, despite the industry's lagging fortunes there.

The US-based carmaker said on Wednesday that it would invest $11 billion in the country in hopes of grabbing a larger share of the lucrative sector as it broke ground on new facilities.

“We are also sending a strong message about the important role of Shanghai and China in GM’s global operations,” GM chairman and CEO Dan Akerson said in a news release.

The Detroit manufacturer made the announcement as it broke ground on a new Cadillac plant and a new research facility. The structures represent a total investment of $1.3 billion and will occupy a total area of about 8 million square feet.

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Cadillac has set goals of tripling its annual sales in China to 100,000 units by 2015 and increasing its share of China’s luxury car market to 10 percent by 2020.

To achieve its goals, it will introduce new models every year until 2016. GM now has about 2.5 percent of luxury sales in China.

GM sold about 30,000 Cadillac vehicles in China last year, but that's still a small number compared to brands like BMW and Audi, Agence France-Presse noted.

“There are generous profits in the luxury car market,” industry analyst Cui Dongshu told AFP.

“GM has to make an investment targeted at the segment and build this plant in Shanghai to localize its products, in order to effectively seize a place in the high-end segment.”

China’s market will continue to grow, with AFP reporting it will climb about 2.5 percent annually to 30 million vehicle sales by 2020.

Only Americans buy more luxury cars and SUVs than the Chinese.

GM’s projections come despite slower growth in the luxury segment, the Wall Street Journal reported.

Audi, for example, enjoyed 41 percent growth during the first quarter of last year, but just 14 percent this year.

“The luxury market right now looks like it’s going to grow at about 4 percent this year. At the beginning of the year, I think it was much higher,” GM China president Bob Socia told The Journal.

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http://www.globalpost.com/dispatch/news/business/130619/gm-investing-billions-china-tap-lucrative-luxury-car-market