Cadillac in China

http://www.autonews.com/apps/pbcs.dll/article?AID=/20121111/GLOBAL03/121109851/gm-wooing-chinas-affluent-preps-cadillac-makeover

Here’s an article from Automotive News on the expansion of luxury car brands into the growing Chinese markets. With China now the world’s largest car market and with a luxury market already rivaling those of the west, car makers are scrambling to appeal to Chinese consumers and gain market share in this increasingly competitive market. [Yes, because everyone is there now and the easy pickings have been had … margins aren’t what they used to be, and we’re starting to see winners and losers. Before we only saw winners and bigger winners…]

GM is counting on the success of Cadillac in the Chinese market to keep the brand afloat, but recently the luxury brand’s penetration has fallen behind not caught up with German luxury cars like Audi, Mercedes, and BMW. Many attribute this recent decrease in the chinese market to a design which does not appeal to the preferences of Chinese Customers. While Cadillac’s bold and futuristic look, with sharp curves and angles, has appealed to many American customers, the confucian foundation of Chinese culture, and a preference for ‘Zhongyong’ leads consumers there to see the car as too “bold and harsh.”

With success in China paramount to Cadillac’s survival, GM is now altering the design of the cars to cater to Chinese preferences, adopting a less acute, more contemporary look. How might this affect Cadillac? Will the increased costs caused by producing different products for American and Chinese markets cover the benefits of increased market shares in China? Think back to Minimum Efficiency of Scale. If Chinese consumers have different preferences for luxury cars than Western consumers, how might the car companies react? Would they attempt to separate operations or find a middle ground between preferences which allows them to enjoy the production efficiencies of producing a product at large quantity to serve both markets?

4 thoughts on “Cadillac in China

  1. This is an interesting article. I’ve never really thought about how culture and history can influence a country’s preferences in regard to automobiles. While it may take a large capital investment upfront to create a new brand of car to serve the Chinese market, I do believe it is crucial to GM’s success, because this is the largest market and they need to gain market share in the region to see some top-line growth. Another thing to think about is status symbols, of which seem to be very important to Chinese consumer preferences. It seems in the US, large Cadillacs have a certain status appeal, but it seems unlikely that very large trucks of that sort will pick up in popularity in China.

  2. There is internal tension here. While Cadillac is a luxury brand in the US (or at least needs to position itself that way, given Chevy and Buick), in China it is Buick that is doing well. In the case of Buick, they have been able to modify cars, bigger rear seats and so on. So round styling, dark colors…in the US my sense is that Cadillac is “edgy” [pun not unnoticed]. That’s done OK here, but not in Europe. (In fact, I’d be curious to know who buys Caddies today in the US.)
    We have to consider economies of scale in marketing, and not just in manufacturing — though sheet metal is expensive, you need several (male-female) die pairs, at a couple million dollars each, times right & left, for each door or fender you change. Anyway, how many vehicles does a dealership need to move to be profitable? Can a Buick dealer also sell Cadillacs, or will their different images detract from each other? In addition, as long as volumes are low they will need to be imported, adding to cost. And need I mention a separate ad budget?
    Note that Audi, as part of VW, established an early presence in China. A black Audi with its rounded lines marks the presence of a Communist Party cadre, it’s the official vehicle of choice, or rather the vehicle of officials’ choice. My sense is that Mercedes and BMW do not do nearly as well, but I haven’t look at data recently so don’t rely a prof’s vague recollections. In any case, there is a cultural element, but it may not go back more than a decade or so! Remember too that marketing images have a short half-life, though in the case of cars that they remain on the road for 10 years or so may extend their impact.
  3. Cadillac has been trying to adapt to markets for years. The BLS was made for Europe when everyone was buying Volvo wagons. Cadillac knew it couldn’t sell it here and didn’t even bother to try.

    The Cadillac ATS was born as a way to get consumers that never thought about buying a Cadillac into the market. I am sure they are going to use the ATS as an example of what they are going to sell in the Asian market.

  4. That is an thrilling article. I’ve by no means surely thought about how subculture and records can influence a country’s preferences in regard to automobiles. While it may take a massive capital funding upfront to create a brand new emblem of car to serve the Chinese marketplace, They want to advantage marketplace proportion inside the area to see some pinnacle-line increase. Any other issue to consider is reputation symbols, of which appear to be very important to Chinese language patron choices. It seems within the us, massive Cadillac have a positive repute enchantment, but it seems not going that very massive vehicles of that type will pick up in recognition in china.

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