General Motors (GM) to cash in on China's Big Car Craze

It's 1999 back in China when it comes to their love of the Cadillac Escalade and General Motors Corp (NYSE:GM) is once again going to cash in. Hard to believe?  Believe it.  China auto sales are expected to grow 15 to 20% this year. But demand for the biggest vehicles is even stronger, with sales of luxury cars and SUVs expected to surge by 40 to 45%.

To Quote Ludacris:

Uh, Cadillac grills Cadillac mills
Check out the oil on my Cadillac spills
Matter fact candy paint Cadillac's kill
So check out the ho's my Cadillac fills
20 inch wide 20 inch high
Oh don't you like my 20 inch ride
20 inch thighs make 20 inch eyes
Hoping for American 20 inch pies

That's right investors, China is getting on the train, and GM is going to cash in, big time.  Joe Mcdonald from AP wrote an article titled - Gas guzzlers a hit in China, where car sales are booming on Monday.  This is a must read Masters.

Here's what Joe had to say:

High, wide and fuel-hungry, the gleaming black Cadillac Escalade on display at the Beijing auto show is an unlikely car for an era of record oil prices.

But while sport utility vehicle sales in the U.S. are tumbling, automakers are finding that for China's newly prosperous car buyers, bigger is still better.

So General Motors Corp. has made the Escalade a star of its auto-show display and is eager to get it on the market here.

"If you look at the fastest-growing market segments in China, there are two -- SUVs and luxury cars," said Joseph Y.H. Liu, GM China's vice president for sales and marketing.

Daimler says Mercedes sales in China surged 42 percent in the first quarter. Sales of R-class minivans jumped 110 percent while those of M-, G- and GL-class SUVs doubled. The company says China is the second-biggest market for its S-class sedans, behind only the United States, and accounts for one-third of global Mercedes sales.

GM showed off its new Cadillac CTS sedan, which it said was designed with China in mind. It added a bigger back seat to the basic CTS model sold worldwide, since many Chinese owners sit in back while a chauffeur drives.

Cadillac's entry in the SUV competition, the Escalade, can seat up to eight people and gets an estimated 12 miles per gallon. It goes on sale in China next year.

For SUV sales, "the volume is low but the growth rate is high, and we're all trying to get into this segment," said Robert Socia, executive vice president of Shanghai General Motors, a GM joint venture with a Chinese partner.

GM shares are on fire today up 8% thanks to Ford (F) reporting a profit, it's amazing but this is Wall Street. Consider GM is the auto company you want to invest in, if any, and their shares are trading near all time lows:

GM plans to sell a Buick Lacrosse sedan with a gasoline- electric engine system in China by August. It expects the hybrid to attract wealthier customers. Hybrids use gasoline or diesel engines and electric motors to power the wheels.

U.S. Market

GM aims to get 75 percent of its sales from outside the U.S. within a decade as its domestic market shrinks. GM's first- quarter U.S. sales fell 11 percent, as the subprime mortgage crisis crimped demand and the company lost market share to Toyota and Honda Motor Co.

GM's sales in China grew 19 percent last year, the slowest pace in at least five years. Volkswagen, which began making vehicles in China more than a decade earlier than GM, is closing in on the U.S. carmaker's sales lead in the world's second- largest vehicle market.

Masters, GM is trading at a great entry point, and they pay a dividend.  The dividend is not what it used to be, but it's still there and that's more than a ton of other companies can provide during this time of uneasy investing.

SOURCE: Bloomberg.com, AP.com

Disclaimer: The Author has no positions in GM.