China's taste for Cadillacs pumps up GM sales

General Motors is firing on all cylinders, selling 10 million cars in a year for the first time, and riding a big gain in China on record sales for Cadillac.

Fourth-quarter and 2016 calendar-year results, which the automaker reported on Tuesday, show equity income in China of $500 million for the quarter and $2 billion for the year.

GM sold 3.04 million vehicles in the US in 2016 and increased its retail share 0.5 percentage points. The record sales last year lifted GM to a record operating profit of $12.5 billion, up 16 percent.

In China, GM's largest market, deliveries increased 7.1 percent to a record 3.87 million vehicles.

Chinese consumers are also showing some fancy tastes: Cadillac volume in China rose 46 percent in 2016 to 116,406 - the first time it has passed 100,000 in China in a single year - lifting global brand sales 11 percent to a 30-year high.

"The ATS (compact luxury sedan) product line has been our best-selling vehicle in China," David Caldwell, Cadillac's product communications manager, told China Daily. "That was the case for the 2016 calendar year.

"It will likely be surpassed by the new XT5 crossover - for instance last month, XT5 was highest-volume," he said.

Prices for the XT5 in China range from $52,294 to $78,448.

Last month, Cadillac sales in China increased 116 percent, while in the US, they were up 1.2 percent.

"We are growing the business significantly and attracting a youthful and affluent demographic, elevating the aspirational character of the brand," Cadillac President Johan de Nysschen said on Feb 2. "This is particularly the case in China, where our growth is explosive and sustained."

GM Chief Financial Officer Chuck Stevens said the company is benefiting from strong sales of higher-priced trucks and crossover sport-utility vehicles, The Associated Press reported, which is right up Cadillac's alley.

"We are allocating more capital to growth and profit pools where we think we can earn a long-term return," he said.

Sales of cars in the US are stalling as buyers shift to SUVs, which is a plus for GM. Car sales were only 37 percent of the market in January, but made up almost 50 percent two years ago, AP reported.

In December, SAIC GM, a joint venture in China, was fined $28.9 million (201 million yuan) for alleged price-fixing, by China's National Development and Reform Commission.

David E. Zoia, editorial director of WardsAuto.com, told China Daily that GM could face more pricing pressure in China.

"(GM) has expressed concerns over continued pricing pressure, and that could squeeze margins there in coming months.

"The fine related to allegations the automaker set a pricing floor for dealers means GM might not be able to protect the value of its brands and the health of its retail network as well as it might have," Zoia said.

He said "dealers under this continued competitive market pressure might be tempted to cut new-vehicle prices further, eroding vehicle residual value in China and, ultimately, negatively impacting their own bottom lines."

williamhennelly@chinadailyusa.com

(China Daily USA 02/08/2017 page1)