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Why Did General Motors (GM) Stock Gain Today?

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General Motors (GM - Free Report) stock got a nice lift on Thursday thanks to a boom in Cadillac sales in a seemingly unlikely place: China.

The U.S. auto conglomerate’s overall sales in the country, which is home to over 1.3 billion people, set a record in July, as retail sales jumped by 6.3% to total 287,581 vehicles. Sales of GM’s Cadillac, Buick, and Baojun brands also hit all-time highs last month.

GM’s only real luxury segment, Cadillac, sold 12,006 total units in July, which marked a 37% increase year-over-year. While sales have slipped in the U.S., the brand kept up its double-digit growth pace in China for the 17th month in a row. Cadillac’s sales are up 69% so far this year—which marked the first time Cadillac sold more vehicles abroad than domestically.

America’s original luxury car brand has tripled its Chinese sales over the last five years, and it now rests behind only BMW, Mercedes Benz (DDAIF - Free Report) , and Audi (NSU - Free Report) in the luxury sector. This push has been spurred by the fact that 90% of Cadillac’s sold in China are now built at GM’s new Shanghai factory and therefore don’t face hefty import tariffs.

Cadillac was not GM’s best selling car brand in China in terms of overall vehicles sold, but the high price point helps to bolster the company’s bottom line more than lower-end models. Sales of Cadillac’s ATS-L model soared 66% in July, while CT6 sedan sales skyrocketed 181%.

On top of revved up sales, Chinese buyer demographics are also very encouraging.

In the U.S., the average age of Cadillac buyers rests at roughly 60, while Chinese Cadillac owners are in their mid-30s. The relatively nascent Chinese car-buying boom also comes with another added benefit: less stereotypes that the brand is in fact meant for older generations.  

“It sets me apart and represents American heritage,” 40-year-old Shanghai-based entrepreneur Zhenyu He told the Wall Street Journal recently.

GM’s other brands still blow Cadillac out of the water in terms of total sales. Chevrolet sales grew by 24% and overall SUV sales jumped by 50%. Of all the brands that GM sells in China, Buick sold by far the most vehicles in July, with sales climbing 4.4% to 93,347 units.

As of July, GM sold a total of more than 2.05 million vehicles in China.

Bottom Line

The surge in Cadillac sales in the world’s largest automotive marketplace is a huge win for both the brand and GM. And China’s growing middle class could prove to be just the market that GM and Cadillac need amid slowing U.S. sales.

Shares of GM jumped over 2.30% in morning trading but now hover around 1.48% higher than yesterday’s close. GM is currently a Zacks Rank #3 (Hold) but scored an “A” for Value and a “B” for Growth in our Style Score system.

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