General Motors Co. opened a Cadillac factory in China on Thursday to target the country's growing but crowded luxury car market.
The 8 billion yuan ($1.2 billion) factory operated with its main Chinese partner, Shanghai Automotive Industries Corp., will have an annual production capacity of 160,000 vehicles, GM announced.
Cadillac began selling in China in 2004, coming late to a luxury market dominated by BMW, Mercedes Benz and Volkswagen's Audi.
China is the biggest auto market by number of vehicles sold but last year's sales growth slowed to 7.3 percent, jolting an industry that looks to this country to drive revenue.
"We do firmly believe that there is a strong potential for luxury (cars) in China," said Matt Tsien, president of GM China. "Last year, obviously it's been a challenging market overall, not just for luxury but the overall market has moderated."
The factory is due to begin producing Cadillac's CT6 model next week. Cadillac makes two other models, the XTS and ATSL, at factories in Shanghai.
Tsien said China's luxury vehicle sales could grow to 3.5 million vehicles a year by 2020, which would make it the biggest luxury market.
Cadillac says its sales in China rose 17 percent over the previous year to just under 80,000 vehicles.
"At some point you have to make the decision to be in the premium segment in China because it is going to be the, still, the highest growth opportunity in the world," said industry analyst Bill Russo of Gaofeng Advisory Co. "It's, frankly, a segment that offers a lot of margin opportunity in spite of the fact that there is pricing pressure."