SHANGHAI – As GM (IW 500/4) was busy breaking ground to produce luxury Cadillacs for the world's biggest auto market, the company announced that it will invest $11 billion in China through 2016.

The figure includes four new plants, including the $1.3 billion Cadillac factory in Shanghai.

"China is a critical market for General Motors today and General Motors tomorrow," GM chairman and CEO Dan Akerson said.

GM is already the largest foreign auto maker in China by sales, but it has lagged behind in the country's luxury segment, in which German companies hold an estimated 80% share.

GM sold a record 1.33 million vehicles in China for the first five months of this year, up 10.6% from the same period last year, according to the company.

The Cadillac plant will have annual output capacity of 160,000 vehicles, with production to start in two years.

"We're going to bring our high-end, premium product here and we're going to see how we run against the competitors from Europe and Japan," Akerson said.

GM has already announced plans to introduce one new Cadillac model a year in China through 2016 to boost annual sales of the brand from around 30,000 vehicles last year to 100,000 by 2015.

The US company hopes to capture 10% of China's luxury car market by 2020, up from the current 2.5%, GM officials said Wednesday.

They declined to say what Cadillac models will be produced at the new plant.

GM launched a locally produced Cadillac sedan, the XTS, in China earlier this year and also imports the Cadillac SRX, a sport utility vehicle, for sale in the country.

"There are generous profits in the luxury car market," said Cui Dongshu, deputy head of industry group the China Passenger Car Association.

"GM has to make an investment targeted at the segment and build this plant in Shanghai to localize its products, in order to effectively seize a place in the high-end segment," he said.

Speaking at a groundbreaking ceremony, Akerson forecast China would eventually become the world's largest luxury car market with sales of 3.0 million vehicles.

Consultancy McKinsey has put the Chinese premium auto market at 1.25 million vehicles last year, second only to the United States.

Other GM plants planned for the next three years include one for mini-commercial vehicles in Chongqing city, as well as others in the cities of Wuhan and Shenyang, officials said, but they did not give details.

China's overall auto market would grow eight to 12% over the next four to five years, eventually reaching 30 million vehicles by the end of the decade, Akerson said.

-Bill Savadove, AFP

Copyright Agence France-Presse, 2013