Cadillac Is Large in China
A Cadillac CT6 inwards an aquarium tank grabs the attention of a passerby in a elegant Shanghai shopping district.
Photographer: Feature China/Barcroft Media/Getty Pictures
General Motors has been spending billions of dollars on Cadillac, attempting to recapture the magic that made the name synonymous with luxury in the U.S. for almost sixty years. There are signs the effort is ultimately paying off—in China.
Aggressive advertising and a hot fresh entry, the XT5 sport-utility vehicle, helped Cadillac thrust past Lexus to become China’s No. Four luxury car brand last year, as annual sales hopped forty six percent, to 116,000. While German luxury brands, led by Volkswagen’s Audi, have seventy five percent of China’s market for upscale vehicles, challengers such as Cadillac, Lexus, and Jaguar Land Rover are making inroads, says Michael Dunne, president of consulting stiff Dunne Automotive in Hong Kong. Cadillac likes some American swagger on the mainland, thanks to the popularity of GM’s Buick brand and the local admiration for U.S. icons such as Starbucks, Apple, and Nike. That’s given Cadillac a boost while it fights to revive its lagging business at home. In America, Caddy sales fell three percent last year despite a record auto market, and its “Dare Greatly” ad campaign hasn’t done much to counter its second-tier photo among affluent baby boomers. “The brand is recognized in China as having long heritage and pedigree,” says Cadillac President Johan de Nysschen. “It is also seen as fresh and fresh. Its U.S. history has had its ups and downs.”
Mostly down. Cadillac’s U.S. sales peaked in one thousand nine hundred seventy eight at 347,000 vehicles. Quality issues and cars that looked too much like Chevrolets and Buicks eroded the brand’s value until it lost its upscale sales crown to Ford’s Lincoln in 1998. Boomers then embarked a love affair with Toyota’s Lexus brand and German nameplates including BMW and Daimler’s Mercedes, which have battled it out ever since. Cadillac sold 170,006 vehicles in the U.S. in 2016, less than half the 374,000 Mercedes did.
GM is lavishing $12 billion on fresh Cadillac models that it will sell globally by 2020. Several are SUVs, favored by American and Chinese luxury buyers. While it suggested to buy out more than forty percent of its nine hundred twenty five U.S. dealers last year, Cadillac plans to almost dual its dealership count in China, to 300, in the next few years.
That’s why GM was convenient opening a $1.Two billion plant in Shanghai in two thousand sixteen to build the fresh CT6 sedan and XT5 SUV. Embarking production on the mainland helped to jump-start growth because the locally built vehicles avoid China’s twenty five percent import tariff, which, when added to the country’s 17.Five percent value-added tax, made Caddys too pricey for many buyers. Dunne says the construction of the plant also wooed many Chinese buyers that Cadillac is committed to the market and will be there to support its customers and provide service and parts.
Discounting has been a main reason behind the brand’s growth. One Cadillac dealer in Beijing, who asked not to be named, says his operation was discounting sedans by fifteen percent to twenty percent last year. One of his promotions was called “Five+1=6,” which suggested BMW five Series owners a deal to trade in their car for a Cadillac CT6 at a price of one yuan (15¢).
Yu Shichao, a 26-year-old founder of a health-care startup in Beijing, says he bought a CT6 in September at a twenty percent discount. While doing research on a BMW 730, he learned that a well-equipped CT6 in the U.S. can cost about the same as a BMW seven Series. In Beijing he got the CT6 for the price of a cheaper BMW five Series. Buying the Caddy made him feel like a clever shopper, he says.
De Nysschen says there’s been discounting by all automakers in China, especially as its domestic manufacturers have introduced lower-priced vehicles and global companies have built more factories locally to avoid tariffs and reduce prices.
Cadillac has particularly targeted youthfull buyers on the mainland like Yu. The brand went for a gritty kind of cool several years ago with television ads that featured actor Brad Pitt with a goatee and his hair pulled back in a bun, driving an XTS sedan through San Francisco. And last year its “Dare Greatly” campaign, which showcases hip Fresh York neighborhoods, ran in powerful rotation on Chinese television and the internet.
The youth treatment seems to be working. De Nysschen says the average buyer in China is thirty three years old. The average American Cadillac buyer is over 60, according to consultant Strategic Vision. “The German brands are somewhat ubiquitous” on the mainland, Dunne says. “Cadillac works hard to be different. People buying Cadillac can distinguish themselves.”
“Dare Greatly” has been far less effective in the U.S., says Alexander Edwards, president of Strategic Vision. One ad runs ninety four seconds online and is shot through the windows of a car rolling through a Fresh York neighborhood while a narrator reads Theodore Roosevelt’s inspirational screed “The Man in the Arena.” The movie never showcases a Cadillac and only exposes that it’s pitching the brand when the logo emerges at the very end.
For American luxury buyers who are glad with their foreign rails, that doesn’t get the word out that Cadillac’s cars are equal to anyone’s, Edwards says. “Cadillac is doing a good job with product,” he says. “But the communications are awful. They are not attracting fresh buyers the way they could.”
De Nysschen puts a lot of the blame on a product line that’s out of step with the U.S. market. Puny and midsize SUVs are the industry’s sweet spot, accounting for about forty percent of U.S. vehicle sales today. Lexus and the German brands each sell three or more such SUVs in their showrooms. Cadillac has one.
For now, de Nysschen’s emphasis is on selling Cadillacs at higher prices in the U.S., reestablishing the brand’s luxury credibility before its upcoming models are released. He says average Cadillac selling prices in the U.S., adjusted for incentives, have risen about seven percent in each of the last two years and now trail only Mercedes. “Long-term brand development is so significant for this company,” he says.
Yet, for all its inroads in China, rivals still question Cadillac’s luxury cred. “I never underestimate any competitor,” says Ian Robertson, head of global sales and marketing for BMW. “There are full-premium brands and near-premium brands. Cadillac is very likely near-premium.”
The bottom line: Cadillac, whose U.S. sales peaked in 1978, could see more of its cars sold in China than in the U.S. within five years.
— With assistance by David Welch, and Yan Zhang