Booming Cadillac Sales Help General Motors Find Growth in China

General Motors (NYSE: GM) said that its sales in China rose 7% to 371,740 vehicles in November, its best-ever result for the month, on strong showings from some of its most profitableproduct lines.

Year to date, GM's sales in China are up 8.5% from the same period in 2015.

GM China sales: The raw numbers

Brand November 2016 Sales Change (YOY)
Cadillac 13,476 70%
Buick 109,495 1.5%
Chevrolet 52,400 2.4%
Baojun 74,779 28%
Wuling 121,566 (0.2%)
Total 371,740 7%

Data source: General Motors.Total sales include a small number of vehicles not included in the brand totals. YOY = year over year.

What worked for GM in China last month

Sales of premium vehicles continue to be strong in China, and GM and its joint-venture partners have been reaping the benefits.

Cadillac sales jumped 70% in November, the fifth month in a row in which GM's luxury brand posted a year-over-year gain of 50% or more in China. The stars of the show continued to be the very popular XT5 crossover SUV and the big XTS sedan.

China sales of the big Cadillac XTS sedan rose over 70% last month. Image source: General Motors.

The XT5, introduced in both the U.S. and China earlier this year, has so far been a big success for the brand. Year to date, Cadillac's sales in China are now over 100,000 vehicles, a first.

Buick continued to be GM's strongest-selling passenger-vehicle brand in China, with the compact Excelle GT -- a sibling to the U.S.-market Buick Verano -- continuing to lead the way with over 36,000 sold. Sales of the midsize Envision SUV continued to be exceptionally strong as well, rising 29% from a year ago with over 24,000 units sold. (That's an astounding number: No SUV in GM's U.S. lineup sold as well last month.)

Buick has begun rolling out a new premium sub-brand called Avenir in China, named after a popular Buick show car from 2015. The concept is similar to the Denali sub-brand offered within the GMC lineup in the United States, and aims to take advantage of strong demand for vehicles with luxury features. Avenir-trim Buicks will have plush interior trim and exclusive color options, and (like their Denali siblings) should deliver strong profit margins.

The Buick GL8, a premium minivan model sold only in China, became the first to receive the Avenir treatment. It was launched on November 5.

The new Buick GL8 Avenir is offered in Earl Purple, a distinctive color exclusive to the model. Image source: General Motors.

Chevrolet sales rose modestly on good small-car sales. The Cavalier, a new inexpensive compact sedan based on the previous-generation Cruze, sold over 12,000 units in its second month the market. The small Sail, the (new) Cruze, and the midsize Malibu each sold over 10,000 units.

Baojun is an inexpensive brand developed specifically to compete with domestic Chinese automakers. Its products are priced to compete with lower-cost domestic rivals but are backed by GM's global reputation for quality. That has proven to be a winning combination. Sales of Baojun's 730, a small minivan aimed at young families, rose 30% from a year ago, and sales of the new 310 hatchback continued to be strong.

GM's commercial-vehicle brand continues to struggle

The news wasn't that bad at Wuling, a brand built around a lineup of inexpensive small vans aimed at commercial customers. The brand has suffered with the end of China's building boom, but sales seem to have stabilized in recent months. Sales were down slightly from a year ago in November, but were up a bit from October's levels.

Analysis: GM is taking more steps to boost profitability

GM's equity income from its joint ventures in China was $459 million last quarter, roughly flat from a year ago. But GM's sales in China were up over 17% over the same period, pointing to the problem: Improving products from those domestic Chinese automakers are putting pressure on GM's pricing, particularly with lower-cost mass-market models. (RivalFord Motor Company(NYSE: F) has been facing the same challengethis year.)

GM is working to offset that with a strong "mix," emphasizing SUVs and premium models that generally deliver higher profit margins. The growth of Cadillac has helped a great deal, as has the success of the Envision and Baojun's 560 SUV; all of those products also did well in October. Going forward, the new Avenir sub-brand should also make a positive impact as more Avenir models are rolled out.

Long story short: While pricing on GM's more affordable products continues to be under pressure, its more profitable products continued to show good sales growth in November. That bodes well for GM's fourth-quarter result in the Middle Kingdom.

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