Cadillac's Shanghai plant has produced its first batch of luxury sedans -- this is General Motors' first plant outside the US to do so. China's auto sales however, have kissed goodbye to the good old days of annual high increases in sales. In January, passenger car sales dropped over 10% compared to the previous month. So why would a foreign car maker set up a new factory here in Shanghai despite the downward trend?

General Motors invested some eight billion yuan in its first Cadillac plant in China, and hopes for an annual output of 160,000 vehicles. The plant includes a body fabrication plant, a paint line, a general assembly shop, a high-speed test track and auxiliary facilities. It also has 386 robots helping produce the cars. In late January, the plant saw its first car come off the assembly line -- a CT6 luxury sedan, the highest-class of sedan made in China.

"First of all, it's a very high-tech plant, a very high-tech facility. The plant will produce a variety of Cadillacs in the future, first one is CT6, but we will produce other models, both sedans and SUVs," said Julian Blissett, executive vice president, GM Shanghai.

GM said it sold about 80,000 Cadillacs in China last year, giving it about a 4.2% share of the luxury auto market. The brand says it plans to sell most of the Shanghai-made cars here in China, but it turns out the Shanghai plant will make more cars than the China market can consume. The Wall Street Journal reports that Cadillac's spokesperson David Caldwell says the the brand will start to export about 1,000 CT6's from China to the US late this year. Cadillac is not the first auto brand to manufacture in China for export to other markets. BMW, Mercedes, and Volvo all have made -- though all the export plans are small and designed more to test the waters. Still, why the trend?

"I think the luxury car producers establishing car plants in China because they are still confident that in the future, there will be a big demand, and sell a lot of cars produced in China. The labor cost in China is still remain a little bit lower than what it is in other markets. But there is also other advantages, for instance, the government is supportive to manufacturers when they want to establish a new plant, especially it's a modern one, clean one. But for the time being, the production is a little bit too high, the production capacity, so they prefer to manufacture their cars, and export them to other markets, like the US, like also Russia, and Southeast Asia, and other markets like this," said Guillaume Saint, manager director of Automotive APAC, TNS Sinotrust.

And manufacturing in China for export almost seems to be something that foreign car makers have to do. The growth in the luxury car market in China's tier-one cities is slowing down -- from 19 percent in 2014 to 4.8 percent in 2015.