SHANGHAI -- General Motors will sell its first made-in-China Cadillacs early next year in a market it expects eventually to account for a fifth of global sales of the iconic American luxury brand.
The world's top carmaker intends to go head-to-head against more established high-end models by Volkswagen AG's Audi and BMW AG in the world's fourth-largest vehicle market.
The Detroit giant, second to Germany's Volkswagen in China sales, wants to launch the Cadillac to flesh out its product slate -- from the cheap Spark minicar to luxury models -- as it accelerates a drive to grab market share in China.
GM claims about 10 percent of the Chinese auto market -- including all vehicles from cars to trucks -- versus Volkswagen's 12-13 percent. VW says it has a quarter of the sedan segment.
The Cadillac, from the same GM stable as the Buick and aimed at China's growing band of newly rich, virtually disappeared from Chinese roads in the 1990s.
The luxury sedan will be made in Shanghai, China's richest city with per capita disposable income of 8,513 yuan, official data show. Wealthy Chinese like their cars big and flashy to show off their wealth, industry experts say.
"What they're thinking is, if somebody pulls up in a smaller luxury vehicle, there's a loss of face. That's unique to the China market," said Tim Dunne, managing director of Automotive Resources Asia. "There are a lot of wealthy people in China."
Analysts estimate the luxury sector takes up 5 percent of China's market, versus more than a tenth in the United States.
GM will start selling the "CTS" sedan as an import starting in mid-September at 518,000 yuan ($62,590), the company said in a statement seen by Reuters on Monday.
Both the locally made and imported models will retail for the same price -- about double that of a Cadillac CTS in the United States. It can cost 20 percent more to produce a vehicle in China due to inadequate logistics and higher import tariffs.
GM expects to sell "several thousand" Cadillacs in China to begin with, said China spokeswoman Daphne Zheng, declining to provide a timeframe, and will launch a Cadillac SRX sport utility vehicle before the year-end.
BMW's China plant, opened late last year, expects to sell 18,000 3- and 5-Series models this year, priced between $48,000 and $84,000.
By next year, China will house the only facility outside the United States to crank out the luxury Cadillac.
GM will rely initially on "semi-knocked-down kits", exporting parts of cars mostly built in the United States to China where final assembly will take place. This helps GM skirt high tariffs on imports of finished cars, and allows them quickly to set up production close to the market.
Last week, GM said it was shifting production of the Buick GL8 executive wagon to a formally moribund plant in northeastern China to help free up capacity in Shanghai.
GM and its local partners are investing $3 billion in China over three years to raise annual capacity to 1.3 million units. It expects China to be its biggest market outside the United States this year.
Current sales growth and margins suggest China could produce about a quarter of GM's forecast $4 billion in profits this year, but growth in China's car sales is slowing -- rising just 1.6 percent in July from June to snap a three-month decline.
Analysts say the market could grow 10-20 percent this year after almost doubling to some 2 million units in 2003, as Beijing clamps down on credit to parts of the economy in danger of overheating on the back of alarmingly high investment.