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GM Breaks Ground for a China Plant

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General Motors Company (GM - Free Report) announced that it broke ground for a $1.3 billion plant in China that will manufacture its popular Cadillac luxury model. With this, the automaker intends to capture the potential luxury market in China, which is dominated by European brands. The plant is located in Shanghai’s Jinqiao zone in China.

Earlier, GM had revealed plans to roll out a locally made Cadillac from the plant, each year through 2016. The company aims to produce 160,000 vehicles annually from the plant.

In February, General Motors began producing Cadillac XTS sedan at a plant in Shanghai. The Detroit-based automaker plans to expand Cadillac’s dealer network to 200 by the end of the year from 69 last year despite lagging sales as it is optimistic about the long-term growth in the segment.

In March, GM revealed plans to build four new plants in China in order to boost annual production capacity to 5 million vehicles and triple its exports from Chinese plants by 2015. GM and its joint venture partners in China plan to invest $11 billion in the country by 2016 as part of their major expansion program.

Last year, GM built two plants in China, increasing the production capacity by 20%. With the addition of four new plants, the production capacity will increase further by 30% and vehicle exports are expected to go up to 300,000 units from 100,000 units projected for this year. Currently, the company owns 13 assembly plants in China.

Apart from GM, Ford Motor Co. (F - Free Report) has embarked upon an aggressive expansion plan in China that includes plans to triple its lineup in China by introducing 15 models, including the Kuga small sport utility vehicle by 2015. Currently, the company sells seven models in the country.

In order to develop the new models, Ford will build new plants raising its capital spending to about $6 billion annually by mid-decade from $4.3 billion in 2011. In order to keep pace with the expansion, Ford also plans to double its workforce by hiring 1,200 employees by 2015.

Ford anticipates global sales to expand by 50% to 8 million vehicles by 2015 given the potential growth in Asia, mainly China and India; and rising demand for small cars. The automaker anticipates Asia-Pacific to account for 40% of its vehicle sales in four to five years. The company also anticipates Asian sales volumes to double and account for a third of its global sales by 2020.

According to the China Association of Automobile Manufacturers (CAAM), growth in total vehicle sales in China deteriorated to 9.8% in May from 13.4% in April. A total of 1.76 million vehicles were sold during the month, leading to sales of 9 million vehicles for the first five months of the year, up 12.6% on a year-over-year basis.

Among the U.S. automakers, General Motors sales went up 9.4% to 252,942 vehicles in the month, driven by strong demand for Buick cars. Ford Motor sales were impressive, soaring 45% to 70,540 units in May.

Japanese automakers continued to be the losers due to the political conflict between Beijing and Tokyo over disputed islands in the East China Sea. Sales of Japanese brands, including Toyota Motor Corp. (TM - Free Report) and Honda Motor Co. (HMC - Free Report) , fell 11.5% year-over-year in the first five months of the year, according to Xinhua news agency.

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