BEIJING -- General Motors is scaling back plans to produce Cadillacs in China.
Production of a stretched version of the STS, due to begin in late September in Shanghai, has been halved, say suppliers to the program. Production of the CTS has been stopped, they say.
GM declined to comment on the reason.
Chinese tax rule changes are probably to blame. The government this year increased taxes on locally assembled vehicles with a certain amount of imported parts. Taxes on such vehicles are the same as fully assembled imported vehicles. The changes reduced the incentive to produce some vehicles in China.
GM initially set starting production volume for the STS at 30,000 units annually. That has been cut to 15,000.
The CTS went on sale as an import in China in October 2005. Local assembly began in 2006. But sales were slow - suppliers say parts were stacking up in a warehouse in the Waigaoqiao tax-free zone in Shanghai.
GM sold 1,192 CTS sedans in China in the first four months of this year, according to Automotive Resources Asia, a consulting firm in Shanghai.
A few weeks ago, GM abruptly halted local production and said the CTS would be sold only as an import in China.
"GM said the economics aren't justified" for local assembly, says an executive at a CTS supplier.
Some suppliers are now nervous about STS production; many have invested considerable capital to build production lines for the project.
GM declined to comment on STS assembly, which has not been officially announced.
But the STS should sell well in China, says Yale Zhang, director of emerging-markets vehicle forecasts for CSM Asia in Shanghai.
The STS sold in China will be 3.9 inches longer than the model sold in the United States, suppliers say. The U.S. version is 196.3 inches long. Selling the longer version will allow GM to cater to China's chauffeur-driven corporate class.
Says Zhang: "As a business car, it should have a better reception by the market than the CTS."
You may e-mail Alysha Webb at [email protected]