Though global Cadillac sales dropped 9.6 percent to 20,688 vehicles in July 2015, the brand did post a record Average Transaction Price (ATP) of roughly $52,000.
That ATP represents a record high for the brand for the month of July and is also “higher than either of its key competitors” during the month, “reflecting the strong improvements in sales mix as customers seek fully equipped versions of the ATS, CTS and Escalade lines”, according to Cadillac. Meanwhile, the brand explains that sales are down due to decreased fleet sales.
In a separate report, Bloomberg analyst Kevin Tynan stated that his findings show that Cadillac retail transaction prices rose 8 percent in the first half of the year. It was the second-biggest increase among premium/luxury brands, with only Land Rover being ahead.
Meanwhile, data from TrueCar Inc. shows Cadillacs now selling for roughly 7 percent less than a comparable new BMW. A year ago, new BMWs sold for 14 percent more than Cadillacs.
The tradeoff between volume and ATP (and, ultimately, profit per unit) is obvious, though a circumstance that some dealers aren’t necessarily happy about.
More on Cadillac’s July 2015 sales results:
Comments
Now all they have to do is sell more units and Cadillac will be rolling in the dough.
There are silver linings in the weaker than desired volumes.
The higher ATP should hopefully keep dealers satiated until the higher volumes return.
Isn’t that great , being outsold by the European prestige imports , but we are making another 3 or 4 thousand dollars more profit on what we sell . Only the accountants would love this figuring , for it is truly embarrassing , foreigners outselling us in our own house !
Yes, it is embarrassing, but it’s out neighbors buying the imports. People feel it is cool and chic to buy imported, no matter how good or better the domestics are.
Apathy on the part of Cadillac and Lincoln in defending it’s home turf is what allowed the ‘foreigners ‘ a foothold and ultimately dominance in the segment.
The domestic team is finally getting in the game and committing the resources to take the fight to the interlopers.
Time will tell if they suited up for the game to late.
But that’s not really the point.
The reason ATPs are an important metric is that they show how much consumers are willing to pay for a product or brand (spending/demand threshold, in economic and/or accounting terms). What it means is that people are willing to pay more for Cadillacs; it’s an indicator of how desirable a product/brand is. And for a brand that is trying to transform itself in image, ATPs are a primary indicator of whether or not what they are doing is working.
Here’s the way it happens (an oversimplification, for more — see an MBA-level marketing book):
1. Consumers spend more on a product
– Brand awareness grows, brand image changes, public sentiment starts to change
2. More consumers buy the product
– ATPs steady out (as BMW’s and Benz’s have).
So, higher volume is coming.
Chris thank you, you get how this game is played.
This segment does not work like the value groups.
Case in point Ferrari even limits the numbers they sell to increase the prices of units sold. This help makes for higher profits and build consumer spending and demand.
GM will grow more sales here but they are not worried where the others are in volume near as much as long as they are making more money.
Lower prices are like smearing raw hamburger on the kid to get the dog to play with him.
Here working to improve image and profits work together.
As the cars continue to improve as does the marketing success will be ours.
Porsche played the volume game in the 80’s and sold s ton of 944 and 924 model but sold them cheap and nearly killed their image.
You can not sell Cadillac’s in mass volumes any more. Yes the numbers will increase but never to the levels they once were and it is because that is how things work.
One thing that’s working against Cadillac is their dealer incentive system:
As I understand it, right now, it’s the same system for all four brands …
– you get dealer cash when you order cars from the factory. (The more you order, the more $ you get).
– the bonus from the mothership is tied to how many cars/trucks/SUVs you as a dealership sell.
I’m sure that’s over-simplified, but it’s a model that works better for, say, Chevrolet, than Cadillac. And this program has been in place long enough that it’s probably part of the dealer body’s DNA.
So, it would seem that – for Johan’s plan to work – Cadillac needs to get out from under the ‘move the damn sheet metal and make more money’ model, and replace or alter it with a Cadillac that rewards dealers on a different set of metrics.
(Increasing monthly and/or quarterly transaction prices being one of them). I’m sure there are also other ways to incentivize Cadillac dealers. And I think brand image will also get a boost when product is consistently irresistible, and marketing is superb.
But right now – again, as I understand it – there’s really no incentive for dealers to hold the line on pricing, because their bonus system is mostly tied to a sales-based model that dates to the 90s. And until they have other methods of getting rewarded, re-orienting the dealer-mindset will be difficult.
That will changers product continues to improve and buyers come back as repeat Cadillac buyers as the image continues to be repaired.
Though I understand you are oversimplifying, I think you are misunderstanding the system.
There is no cash awarded for floorplanning/ordering a vehicle. It’s all now related to sales volume, CSI and SSI. PPH will also start to get tied into it.
Overal, GM has 2 incentive programs: Standards for Excellence and Mark of Excellence, or SFE and MOE, respectively.
Now, the parts of the system that are related to sales volume are lower for Cadilac than they are for Chevy or Buick-GMC.
I’m sure there are a lot of moving parts involved in improving Cadillac’s future.
But this is the lead of what I read and based my comment on. There’s more to it, but this seems to be the rock and the hard place Mr. de N finds himself in now … and why Cadillac possibly needs to reconsider how their dealers are incentivized:
“Two main elements of Johan de Nysschen’s plan to rehabilitate Cadillac’s image are to tighten dealers’ inventories and quash their sell-at-any-cost mentality.
There’s a big problem though: Cadillac’s dealer-incentive programs today are designed to do just the opposite. One makes cash payouts for growing sales; the other attaches up to $700 in dealer bonus money to every vehicle they order from the factory.
De Nysschen, Cadillac’s president, says those programs must change for dealers to adopt a true luxury mindset, one based on an engaging customer experience, rather than sales volume.
“The business model has been structured more for the bigger brands inside General Motors, rather than the small Cadillac brand,” de Nysschen said. “The luxury business is different.”
It’s an example of the obstacles de Nysschen faces in reshaping Cadillac’s retail network into something that more closely resembles those of German luxury brands such as BMW or Audi. Most of Cadillac’s more than 900 dealerships are hard-wired to carry far more inventory than other luxury stores, often moving the metal through deep discounts.”
It goes on from there. Didn’t say Cadillac wasn’t held to the same grading system as other GM brands, but that might well be the case. In any event, it’d be cool to see this re-birth succeed.
“the other attaches up to $700 in dealer bonus money to every vehicle they order from the factory.”
I don’t know what this is referring to, exactly, but I believe this is the “holdback” money. If so, this isn’t unique to Cadillac or to GM, it’s something that every automaker does with the exception of the ultra-luxury brands like RR, Bentley, Ferrari, etc.
Regardless, the changes that are being made will help Cadillac well into the future. There will be a brief transitionary period that may hurt short-term, but it will be very much worth it long-term.
Don’t claim to be an expert on ATP but follow me on this analysis:
14,154 units sold in US in July at ATP of $52K=$730,008,000
2930 Escalades at say $75,000 average=219,750,000
66 ELRS at say $65,00: 4,290,000
If you extract Escalades and ELRS you have a total ATP pool remaining of $511,968,000 for 11,158 remaining vehicles comprised of SRX, CTS, ATS, and XTS. Average ATP for those vehicles would be $45,884 which is not as stellar as $52,000.
For further reflection, cheapest SRX with $3K cash back and fwd is $35,600 and an awd cheapest is $44,130
Cheapest XTS fwd with $4K back is $41,655 and awd is $47,995
Cheapest CTS is rwd 2.0 turbo at $46,340 and awd is $48,340
Cheapest ATS is rwd 2.5 with $2K back at $32,210 and the cheapest 2.0 turbo awd is $36,240
As I said, I don’t claim to be an expert on ATP, but if my concept is correct I am not impressed! Doesn’t look like a lot of loaded versions were moved out the door to me?
Good analysis, Martin. But consider that the ATPs of the ATS, CTS, XTS and SRX all had some decent incentives in July ranging from $3,000 to $4,000, and the ATPs of those vehicles are actually quite healthy.
The average transaction of the Escalade is well north of $75K. On average, most people are paying around $85K for the Escalade with a split of the Luxury, Premium and Platinums Collections.
Thanks Chris. I’m fairly certain “prices” I quoted above are net of the cash back offers.
With that being said, could not be a lot of loaded units sold since cheapest CTS is already over the average; the “blended rate” of AWD& FWD is very close to the average for the XTS: the cheapest AWD SRX is just below the average. The only model that has any wiggle room of any consequence is the ATS. And even there, believe a lot of the units were probably the standard with the “plush, ultra-luxurious” authentic leatherette upholstery.
If it weren’t for the Escalades lofty ATPs, July wouldn’t have been much to party about!