US auto giant GM breaks ground on China Cadillac plant

SHANGHAI (AFP) - US auto giant General Motors on Wednesday broke ground on a US$1.3 billion (S$1.6 billion) plant in Shanghai to produce Cadillacs as it seeks a larger share of China's growing market for luxury cars.

The plant will have annual output capacity of 160,000 vehicles with production to start in two years, GM officials told a news conference before the opening ceremony.

"We're going to bring our high-end, premium product here and we're going to see how we run against the competitors from Europe and Japan," GM chairman and CEO Dan Akerson said.

Although GM is the largest foreign auto maker in China by sales, it has lagged behind in the country's luxury segment, in which German companies hold an estimated 80 per cent share.

But the American company has ambitious plans for the Cadillac with an aim to capture 10 percent of China's luxury car market by 2020, GM officials said.

Its current market share for the luxury auto market in China is around 2.5 per cent, they said.

"It's going to take a while to catch up," Mr Akerson said.

GM has already announced plans to introduce one new Cadillac model a year through 2016 to boost annual sales of the brand from around 30,000 vehicles last year to 100,000 by 2015.

GM launched a Cadillac sedan, the XTS, in China earlier this year.

"There are generous profits in the luxury car market," said Cui Dongshu, deputy secretary general of industry group the China Passenger Car Association.

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

China's premium car sales will grow an annual 12 per cent through 2020, consultancy McKinsey forecast earlier this year, though that is a slowdown from an average 36 per cent a year for the last decade.

McKinsey, which defines "premium" cars as those costing from US$32,000 to US$190,000, put the Chinese market at 1.25 million vehicles last year, second only to the United States.

GM sold a record 1.33 million of all types of vehicles in China for the first five months of this year, up 10.6 per cent from the same period last year, according to the company.

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