Cadillac Floors It in China

To coax drivers from their BMWs and Audis, GM is treating shoppers like VIPs

The Cadillac charm offensive in China starts at the front door. In the companys 39 mainland dealerships, showroom attendants greet visitors by the polished-glass entrance, cigars and Napa Valley wines are on offer at a black-marble bar, and VIP rooms with leather sofas provide a comfortable venue for dealmaking. There's even an exhibit of the brand's 105-year history—with a movie and details on features such as hand-stitched leather seats and authentic wood trim—to show off Caddy's pedigree. "Everything gave me the feeling I was a VIP,'" says Hu Ming, a 44-year-old entrepreneur from Shanghai, who in February plunked down nearly $65,000 for a silver-gray Cadillac SLS. "The décor is very different from other brands'. The place has an American style."

Cadillac is counting on its brash brand of American luxury to differentiate itself from the pack. Caddy's parent, General Motors Corp. (GM), has done well in China with Buick and Chevrolet, but it has lagged at the high end. While Audi, BMW, and Mercedes (DCX) have been in Chinese showrooms for a decade or more, Cadillac arrived just three years ago. The European trio controls 77% of luxury-car sales in the mainland. And Cadillac? Just 2.7%.

Now, Caddy is revving up its marketing engine to narrow the gap. It has more than doubled the number of showrooms on the mainland in the past year. And it offers five models in China, ranging from the $46,000-plus CTS sedan to the $140,000 Escalade SUV and the $160,000 XLR convertible roadster. (Sticker prices run higher than in the U.S. because China slaps a 25% tariff on imported cars.) Cadillac got buzz when it delivered a pink CTS to Mary Kay Inc.'s top salesperson in China. It also ferried VIPs to a boat show in Shanghai and an exhibition of American art in Beijing.

Then in February, Cadillac introduced a China-designed and -built version of its SLS sedan. The car is four inches longer than the U.S. model, a nod to Chinese customers, who like a roomy backseat since they tend to have chauffeurs. The model powered a 62% jump in Cadillac's mainland sales in the first quarter, compared with a 19% increase for all of 2006. "We are putting everything in place," says Karen Rafferty, Cadillac brand director for China. "Building a brand is certainly not a sprint."

MILLIONAIRES GALORELuxury is a big deal in China because the high end is the fastest-growing part of the market. While overall sales of domestic passenger cars jumped by 35% last year—hypergrowth, to be sure—those of locally made luxury vehicles soared 57%. "With the growing ranks of millionaires, a booming stock market, and booming economy, the prospects are very strong," says John Bonnell of consultancy Automotive Resources Asia Ltd. in Bangkok. Bonnell predicts luxury sales will more than double by 2010, to 380,000 cars a year.

GM wants to make China the No. 2 Cadillac market. But it won't be easy to unseat rivals. Audi alone commands a 45% share. And the Asians are ramping up, too, led by Toyota's Lexus. "The problem is Chinese people are not so familiar with [American brands]," says Jia Xinguang, an independent auto analyst in Beijing.

One who has taken notice is Guo Jing. The 23-year-old Beijinger is a self-confessed car fanatic: His family owns a Citroën (PEUGY), a Hyundai, a Chrysler, and a Jeep. Then late last year they shelled out $58,000 for a black 2.8 liter CTS. What got Guo interested in Caddy? Another American icon: Hollywood. "There was a Cadillac," he says, "in the movie The Matrix Reloaded."

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