General Motors

General Motors says luxury-car demand growth in China will ease

The US firms says sales will rise 4 per cent this year at half the expected pace

PUBLISHED : Thursday, 20 June, 2013, 12:00am
UPDATED : Thursday, 20 June, 2013, 3:53am

General Motors, which broke ground on a new Cadillac assembly plant in China yesterday, forecast demand for luxury cars will grow at a slower pace than the total vehicle market this year.

Sales of premium cars on the mainland will probably increase about 4 per cent this year, or about half the pace that the carmaker had expected at the start of the year, Bob Socia, GM's China head, said in Shanghai yesterday. The carmaker has said it expects total industry sales to increase about 7 per cent to 8 per cent this year.

Demand for luxury items from Swiss watches to sports cars have slumped since President Xi Jinping ordered officials to cease lavish spending and stepped up investigations into graft.

Sales in China, where German brands accounted for three of every four premium cars sold, are slowing at a time when European car deliveries are tumbling to a 20-year low.

"Even taking into consideration the crackdown on corruption, calls for frugality and slower economic growth, luxury car demand should hold at around 10 per cent growth," said Han Weiqi, an industry analyst with CSC International Holdings in Shanghai. "GM's estimate of 4 per cent growth means they expect the segment will be pretty sluggish."

GM aims to more than triple Cadillac sales in China to 100,000 by 2015 as it brings out a new model every year until 2016.

Chief executive Dan Akerson, in Shanghai for the factory ceremony, has said the luxury brand is a priority in the firm's plan to invest US$11 billion in China until 2016.

The carmaker aims to win 10 per cent of China's luxury market by 2020. Luxury-vehicle sales rose at more than twice the pace of the total passenger-vehicle market last year, research firm LMC Automotive said.

It will take some time for GM to catch up with Audi and BMW in luxury sales, Akerson said, though "as they say, all long journeys start with a first step".

"Twenty-five, 30 years ago, you didn't see many Audis in the United States, not that many BMWs," he said. "If you bring good products to the market, then it's up to us to sell, make the public aware of the features, functionality and quality."

Rising consumer incomes and growth in manufacturing capacity will help GM achieve its target of selling five million vehicles in China by 2015, Akerson said.