Shanghai General Motors Corp heralded the Asian debut of its Cadillac CTS coupe at the Shanghai auto show last month, seeking to enter the mainstream luxury coupe segment in China and entice younger consumers.

Luxury car makers have been particularly keen to expand their presence in China as decades of boom times have swelled the ranks of the wealthy. Their push comes even as big cities such as Beijing slap restrictions on car registration and Chinese policy makers turn their focus toward smaller, more energy-efficient cars.

Is Cadillac doing too little, too late?

Cadillac is the most successful US luxury marque in the world. The prestige brand has become synonymous with the upper echelons of US politicians, business leaders and Hollywood celebrities.

But the glitz of the name hasn't transposed easily to China. The brand was first introduced in China in 2004, when GM began manufacturing the car for the first time outside of the US.

Contrary to Shanghai GM's vision at the time of "taking the lead in China's fledgling luxury market," Cadillac never generated the sales enthusiasm the company had hoped for.

Last year, about 13,700 Cadillacs were sold in China. Although that represented 119 percent growth from 2009, the brand accounted for only 1.3 percent of Shanghai GM sales even after a six-year promotional build-up.

By comparison, China sales of BMW, the world's largest luxury car maker, surged 87 percent to 168,998 units last year, while Mercedes-Benz, which sells Mercedes-Benz, smart and Maybach branded cars, reported 2010 sales in China jumped 115 percent to 147,670 units, far exceeding forecasts.

China also has become the second-largest market for Audi. About 220,000 units were sold in the country last year.

Trailing behind

Cadillac not only trails the three German giants in sales; it also lags Japanese luxury-car models such as Lexus, Infiniti and Acura in China.

Its fizzled record has been attributed to several factors. What's clear is that Cadillac didn't have a winning strategy to stop its rivals running circles around it.

Cadillac now has six models available on the Chinese market, including the SLS luxury sedan, CTS coupe, SLR retractable hardtop convertible, SRX sport utility vehicle, full-size SUV Escalade and CTS V coupe.

That compares with the 17 lines offered by Mercedes-Benz, with 30 model options. BMW has brought its complete car line-up to China, including eight product series.

In 2006, after China slapped higher charges on imported spare parts if companies failed to meet government local-content requirements, news about Cadillac's entry in the market slipped from view.

Though Shanghai GM keeps stressing its confidence in the luxury car market in China, Cadillac still only has one model, the SLS luxury sedan, which is locally produced here.

Lacking Chinese production hurt Cadillac's ability to be price competitive.

For example, the price range of the imported SRX is about 498,000 yuan to 578,000 yuan (US$76,600 to $88,900) while its major rival, the Audi Q5, sells for less than 400,000 yuan.

Mercedes-Benz, BMW and Audi are reaping the benefits of locally produced cars and are planning further expansion.

Mercedes-Benz has been making its mainstream C-Class and E-Class sedans in its factory in China since 2005, and it is investing 3 billion euros (US$4.38 billion) in a new assembly plant and a new engine plant, which will be its first engine plant outside of Germany.

Dieter Zetsche, chief executive officer of Daimler AG, earlier said the car maker aims for its locally manufactured model to account for 70 percent of its sales in China by 2015, up from the current 30 percent.

BMW's locally produced 3-series and Audi's A6L have all proven very popular with Chinese auto buyers.

BMW recently announced it would add 1 billion euros to its investment in China, aiming to bring its capacity to 300,000 units by 2015. Its second Chinese plant, due to open in 2012, will produce the BMW 3-series, an extended wheelbase of the 5-series, and the BMW X1 compact SUV.

Market misunderstanding

Failure to seize on the benefits of local production was but one of Cadillac's missteps. Another was its failure to understand and respond to rapidly changing market demand.

As China grew to become the world's largest auto market, luxury car rivals began tailoring vehicles to the tastes of Chinese consumers.

For one thing, Chinese car buyers like a lot of leg room in a car. Cadillac was finally forced to follow the lead of Audi and BMW and extend the wheelbase of the SLS to allow more leg space, making it the largest business sedan in terms of vehicle length in the same category.

But some Chinese consumers still complain the interior of the SLS feels a little rough and its exterior design looks a bit out-of-date.

Then, too, Cadillac was late in realizing that entry-level models were important to introduce the luxury car market to younger buyers.

The Chinese shift to smaller cars and turbo technologies came after the government imposed a higher tax on cars with larger engine capacity as part of campaign to promote environmental protection and energy efficiency.

Responding to the new green challenge, Mercedes-Benz added its A-class, B-Class and smaller roadster, while BMW brought its X1 compact SUV and BMW 1-series into the market.

But it wasn't until the end of last year that Shanghai GM launched its Cadillac SLS 2.0-liter turbo version, its first model in the Chinese market with an engine capacity smaller than 3.0 liters.

Cadillac is also short of products in the compact SUV segment, where BMW X1, Benz GLK and Audi Q3 are enjoying hefty gains.

Luxury cars priced between 300,000 yuan and 400,000 yuan account for 45 percent of the Chinese market. Cars selling between 400,000 yuan and 500,000 yuan hold an equal share.

Klaus Maier, chief executive officer of Mercedes-Benz China, earlier said the younger-products family, including the Mercedes-Benz B-class and GLK compact SUV and CLK, now account for 40 percent of Mercedes-Benz sales in China.

More compact luxury models will be introduced to China over the next two years, he said.

To some degree, competition in the luxury car segment also rests on image.

Company officials from Shanghai GM are touting the Cadillac as the embodiment of US spirit and individualism.

Such boasts may have a hollow ring to Chinese consumers impressed by the cutting-edge technologies in German luxury brands and the superior services offered by Japanese car makers. The cachet of anything "Made in America" has lost some of its luster as the Chinese consumer market has grown more globally sophisticated.

Cadillac has been investing heavily on brand promotion in China, including sponsorship of a film festival and a TV ad for the SLS luxury sedan that features Hong Kong actor Daniel Wu.

But it's not clear that Chinese consumers are making the connection between snazzy promotion and the merits of owning a Cadillac.

Last year's strong sales growth figure for Cadillac may be a signal that Shanghai GM's efforts are bearing some fruit. But the company has a lot of ground to make up before it can hope to realize its vision as a leader in the luxury car market in China.