General Motors’ prestige luxury brand, Cadillac, is in the process of a well-known transformation, laying down a solid foundation for growth well into the future. And despite declining sales volume, Cadillac is reaping (some of) the fruits from its labor by seeing an increase in average transaction prices.
The average transaction price (ATP) for Cadillacs sold in June in the U.S. market topped $52,000, a $7,000 — or 15 percent — increase over the same period a year ago. The brand attributes the increase to ongoing product enhancements that are “transforming the brand and elevating its position in the luxury marketplace”.
“Our goals are to improve the quality of the business in the U.S., while maintaining global growth,” said Cadillac President Johan deNysschen.
The GM Authority Take
It’s not every year that an automotive brand experiences a $7,000 increase in ATPs. Here’s some evidence that Caddy is doing something right.
Comments
Love to see how those numbers break out: handing out incentives in the face of declining sales, and they manage a 15% ATP increase across the board. Escalade, I can see. Big ticket item – the rest, kind of hard to figure out how they got 15%.
We should all have accountants like that.
There were very few incentives in JUNE.
There were very little incentives in June.
This is what I have been stating all along. Cadillac has been transforming from a large volume company to a higher priced lower volume company as part of their transition.
The bottom line is they will from here on out sell less cars than in the past but make much more money than they have. The incentives we see are just to adjust inventory.
The days of just anyone buying and driving a Cadillac are over. Today forward as in the distant past you will have to really have the means to buy one. No more posers need apply.
Once this pattern is set we will see only people of means owning a Cadillac and all others will need to look to Buick, Lincoln or Lexus for the discount Luxury.
If you want a car to be special you have to make it special and not one you see in every Walmart parking lot. If Rolls Sold their cars for $50K and everyone had one would they still retain their image? This is the risk that BMW and Benz has to deal with in building and selling cheaper models. There is some reward but also a lot of risk to the image. Anyone Remember what the 924 and 944 almost did to the Porsche image till they killed them.
Yes, per unit profit will have increased. But that also doesn’t mean that volume will stay low in the long term. Once Cadillac has the proper vehicles in the proper segments, sales volume will grow accordingly.
Also, the brand image dilemma for the Germans isn’t an issue as they move slightly downmarket, because the products are actually top-notch and still rather expensive for what you get. Cadillac can do the same; but the crucial piece is to make a best-in-class product.
“Also, the brand image dilemma for the Germans isn’t an issue as they move slightly downmarket, because the products are actually top-notch and still rather expensive for what you get.”
Exactly. The subcompact GLA is a priced similar to a well-equipped mid-sized Venza. If you’ve got $31K to spend and it’s down to those 2, the only real advantage the Venzahas is that it is bigger. That’s it.
Mercedes doesn’t care about people thinking that they shouldn’t offer smaller cars at a risk to their public image. That’s not the problem. The problem is in Toyota’s hands: “How do you stop someone from dropping $31K on a much smaller Mercedes instead of on your bread and butter Camry?”
Consider Toyota’s subcompact Yaris. Nobody, ever, is going to pay $31K for that as Toyota can’t make a compelling subcompact luxruy car for that kind of money.
Lexus could command that kind of money with the CT200, but it’s in the compact segment, where there are much, MUCH better cars on offer.
The problem is not so much with the product but the image. You put product into the hands of the common people it make your image much more common. It does not hurt you on the cheap cars but it lessens the image of owning the top end car much more.
Porsche sold a slew of 924-944-968 models but the price they paid is they began to lose their image. They had held an image for only top end cars and they sold for a premium. The 944 sold for a little more than a Camaro price and had about the same performance. In fact the Camaro killed the 944 in show room stock racing in the SCCA. While this was going on the 911 just did not have the image it once enjoyed. Porsche had traded image for volume. Now today they have cut back on models and made sure the cheapest ones are still not cheap. Boxsters are not what I would call low end and they have not harmed the image with a modest increase in volume. The SUV is carrying the volume load as it can with no harm to the car lines.
Harley suffered the same thing with the flood of models and cheap models in the AMF era. Today they are back to mostly high end lower volume models.
The key is if you want to be exclusive and hold a high end image you can not participate in high volume products. If everyone has one or people of no means have them where is the image.
How often do you see a Rolls or Bentley at Walmart? It should be rarely. This is what Cadillac needs to shoot for too.
Cadillac will need to do smaller cars but that does not mean volume cars. These models need to be carefully crafted and priced and kept to a lower volume.
Is $35,000-$40,000 a “common people’s” price for a vehicle? If so, then I should point out that BMW and Lexus have made it their business to sell their most popular vehicles in this price range without sullying the brand image whatsoever. In fact, the image of those two brands today is higher than it has ever been!
Well, it’s always pretty useless to look at one data point and think it’s a trend. Based on the numbers I’ve been seeing with ATS and CTS shipments down, and high-priced Escalade shipments up, I’m speculating this rise in transaction price is just a mix effect – selling more of the higher priced models and fewer of the lower priced ones. Which ought to be alarming to Johan, as you can’t build a brand on one vehicle line. I really do believe he will cause the brand to decline with his higher pricing strategy – he’ll drive away the people who have been the brand’s bread and butter, and he won’t be able to steal any significant business away from the true luxury brands. Stupid GM will realize this in 2-3 years and fire him, but the damage will be done. I am a CTS owner and love mine, but if you look at how Cadillacs still depreciate fast and furiously, it would take a decade or two to change people’s perceptions, and the current lux brands aren’t standing still. When the next financial slowdown occurs, as it inevitably does, Caddy’s higher price game will leave it drowning. Just watch!
The higher average price is most likely due to selling more Escalades, selling new
V cars and comparing to the $12-16k off 2014’s in the same period last year.
The stat is missleading.
Cadillac needs to be careful and not price themselves right out of the marketplace . They dont have the same prestige as the german marques . Just because you raise the price of a vehicle and build fewer of them isn’t a good way to do business nor does it mean a vehicle worthy of the price . Not every car Cadillac builds will be for the wealthy only . They will still have to build a vehicle ( car or SUV ) that will be their bread and butter and help pay the bills . For sure you won’t see many Escalades or CT8’s in Walmarts parking lot , but you will see XT5’s and their smaller SUV”s parked there . And GM needs to be careful and not put all there hope in the Chinese market as we so often here is their strategy . Better to take care of the home market first before going all in in South East Asia .
This transformation will take Cadillac years to accomplish , well past 2020 . But they needed to start somewhere sometime . Johan has planted the seed now we will have to wait and see how the division will grow . Its also going to take a heck-of-alot more than 12 Billion to do it right . After the money has been spent GM will look at what it has bought them and have to make a HUGE decision if it wants to continue trying to play with the big boys .
GM PDT
Agree with you 100%! As I’ve said many times before, if Cadillac thinks their future is strictly conquest sales, GM is fritting away $12B. Marketing 101 basic, must figure a way to retain your loyal and existing customers.
You retain the loyal customers of the class you are targeting. Too many people are no longer what Cadillac needs or wants in their products.
It is time for many to understand that Cadillac is a car that needs to be desired but not one just anyone can afford to buy
The future Cadillac should be the car that is completely compelling in styling and technology on the leading edge. But it also needs to be the kind of car only a specific group can afford to own.
If we all could afford a Ferrari would we have kids and even grown men with posters of them?
People of means want things others can not afford or a smaller group can only obtain.
If you market a car right in this class you want the people to look at you and say I wonder what he does for a living to be able to own a Cadillac. This takes time and some growing pains but it can be done with the right commitment of funds and technology.
I have see this first hand as I was driving a 911 Carrera up Rodeo Drive a while back. When I was walking around I looked at every expensive car to see if it was someone famous. As I drove the Carrera I saw the people on the side walk to the same.
Vanity and ego play a big roll here. Now if you see these cars at bingo halls and trailer parks they kind of lose their luster. Note this is more car focused vs. SUV. The SUV can get away with more volume and less image.
I disagree with you on the last sentence. I desire owning an Escalade but can’t easily afford one, especially the pre-owned models. And I am sure a lot of people feel that way also.
Isn’t that what has already been said !?
The SUV can get away with more volume and less image .
?? Seriously !? The SUV,CUV are the hottest selling vehicles in the market right now . To be able to sell in this segment you NEED an image , and a design that stands out from the rest . Lexus is a perfect example . They sell more RX350’s than anything else . And have been doing so since 1999 . Now some people will say that their desin philosophy is ” out there ” , but they sell more of these than anyone else . Plus their ” image ” is one of high quality and also have a higher resale value than anyone else . There are other manufacturers that have a long standing “image” that are quickly getting into this market segment . $hit even Bentley is going to enter the market soon . And I bet they won’t be selling in huge volumn . Its the folks that have the money to spend will buy one just to show off the new design coming from Bentley because of the IMAGE .