Chinese don't think of Detroit when they think of luxury

SHANGHAI, China -- The luxury market in China has been growing more than twice as fast as the overall auto industry, but Detroit automakers lack a credible entry.

With Ford's Lincoln brand out of the Chinese market, General Motors represents Detroit with its Cadillac brand, positioned above its popular Buick brand to access the burgeoning number of high-end buyers. The Chinese auto industry grew 33% in 2010, while the luxury segment grew 75%.

But when Chinese locals think of luxury, they think of German brands -- Audi, Mercedes-Benz and BMW; Chinese customers consider Cadillac a step down, China-based IHS Automotive analyst Namrita Chow says.

Still, Cadillac's primary goals don't include catching its German competitors right away, despite its 139% sales gain last year, said Kevin Wale, president of GM China. Sales last year numbered about 17,000 for the entire Cadillac brand, fewer than the sales of each of the top nine luxury cars sold in China, which topped out with the Audi A6L's blockbuster 115,000-unit performance. "They're a long way ahead of us," Wale said of Cadillac's competitors.

GM's joint venture with the Chinese company SAIC locally produces the Cadillac SLS -- essentially an STS with a stretched wheelbase -- and the automaker imports the CTS, SRX and Escalade.

Importing cars makes them ultra-expensive, but that's not a problem for many of China's luxury buyers. More than 1 million Chinese make at least 10 million yuan annually -- about $1.5 million, said Kevin Chen, who runs Cadillac in China.

Imagine paying at least $77,000 for a five-seat Cadillac SRX crossover. The price includes a 25% import duty, a 12% tax based on the engine size and a 17% value-added tax, Chen said. A fully loaded model costs $56,725 in the U.S., including delivery.

The larger, less fuel-efficient Cadillac Escalade gets even more expensive. It costs the equivalent of $215,000, after the same 25% import duty and 17% value-added tax and a 40% tax on its 6.2-liter engine. In the U.S., a fully loaded Escalade hybrid costs $89,180.

Even cars produced in China are subject to an engine tax. Cadillac now offers a two-liter turbocharged engine on its SLS to eliminate some taxes.

The brand also would benefit from having a portfolio that competes in more segments, Wale said. For instance, Mercedes-Benz and BMW each has three sedans on last year's Chinese luxury car top 10.

Help could be on the way from two new sedans expected to be introduced in the U.S. starting next year: the XTS flagship, which GM showed last year in China as a concept, and the ATS compact.

Source: Freep