Contrast with VW, which sells a full line of affordable cars – along with its Audi luxury-car lineup, which has become the preferred car brand of China’s wealthy and powerful. Audis carry fat markups – fat enough that the brand accounts for almost half of VW’s global profits, despite it being a relatively small percentage of the company’s total sales.
GM CEO Dan Akerson would dearly love a piece of that action. That’s one of the reasons why GM is rumored to be committing big resources to an elaborate retooling of its own luxury brand, Cadillac. But the fruits of that effort are a few years away
An ongoing battle for the General
Luxury cars aren’t the only way to make big money in China, of course. Ford Motor Company (NYSE:F) has taken a somewhat different tack in China, working to brand its global bread-and-butter cars as a premium lineup. The current-generation Focus, for instance, is positioned as a polished upmarket contender in China, a step up from the inexpensive small cars that dominate the Chinese market. That has worked out well for Ford so far, and the company is spending big to ramp up its presence in Asia – part of an aggressive plan for overseas profit growth in coming years.
But while GM is solidly profitable, it has been struggling for a while with profits that don’t match up to its rivals – in China and elsewhere. There are reasons to believe that the company is making good progress, but it’s clear that investors will have to be patient.
The article GM’s Big Challenge in China originally appeared on Fool.com and is written by John Rosevear.
Fool contributor John Rosevear owns shares of General Motors and Ford. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors.
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