Earlier this week, Cadillac officially priced its upcoming SRX successor, the 2017 XT5. Much like the 2016 Cadillac CT6, the XT5 is seeing a very aggressive pricing strategy, something brand president, Johan de Nysschen, has said is intentional.
The 2017 Cadillac XT5 will hit dealers this coming April and start at only $39,990. That’s still slightly higher than the outgoing SRX, which starts at $37,605, but from a design and content standpoint, the XT5 is looking like a bargain.
However, we want to ask you, has Cadillac priced the XT5 right by not insisting an ultra-premium price?
We think yes. Absolutely yes. Lower prices can be an excellent way to conquest buyers into a brand, however, it’s not the price tag itself that will win a consumer. The value provided will be what sets the 2017 XT5 apart. If Cadillac can convince consumers of this value of luxury, it should be sitting pretty with the XT5 crossover, especially considering the current market for CUVs.
So, with all of that said, go ahead and vote in our poll below, and chat with us in the comment section below.
Comments
Yes this is the correct pricing strategy to build the brand.
Customers who want more content/features can always scale up while the lower starting price will bring more customers to the brand.
Pricing decisions on the ATS and CTS were made before JdN got there and look at how that affected sales.
Cadillac is not at pricing parity. Yet.
Here is the deal I have seen some say this is competitive and cheaper. Well it is competitive but not really cheaper per Bloomberg Business. Bu that is ok!.
Their point was If you are using base price the Audi $40,900 is more and the Benz and BMW are just a little cheaper starting price at $38,950.
But the truth is no one buys a base model in this group. If you did you got a hell of a deal because it was left sitting unsold on the lots.
Most models in this segment sell for much more and up over $60,000
Now they point out for marketing it is important they sell for a similar price. Cadillac is already carried the baggage of darker days of Detroit and if you discount it you appear to be the low cost cheaper version here. Luxury items of value cost more money. The better the diamond the higher the cost.
Also factor in that even with sales down last year on the SRX by 3% the higher prices netted a 7% gain in revenue.
Also factor in that this is not a car for everyone it is only for those who can afford it. Make it too cheap and then you have middle class or lower people buying and sending the message that it is not special. Snobby yes but that is how it works.
Another deal is most in this segment lease. That changes the pricing and if the car is not selling they all offer sweeter lease deals and it helps sales.
In this segment quality is often seen in the price of a car. You may have a better car but if you sell it cheaper it is often seen as less value. Just human nature. We see many products that are marked up just to drive image and it works. A pair of Air Jordans are no better than any other shoe but image and price make them seen of greater value.
This transitional time will be tough but even now with volume dipping some the income is still increasing. This is tolerable as it permits them to make the changes and advance the brand to be more exclusive and yet even more profitable.
It was made clear Cadillac is not discount high volume luxury anymore but they will be a profit hub for GM with no issue.
http://www.bloomberg.com/news/articles/2016-02-11/why-does-cadillac-think-its-suv-should-cost-more-than-a-mercedes
I read the same article (see above) that you are referencing and I think you are a little off on your analysis.
First, all the vehicles Bloomberg price compared with were all smaller models such as the Q5, X3 and GLC.
So an argument really for getting the XT5 is that you get more vehicle and features for the same price as something smaller from one of the other brands.
If you were comparing segments then the MDX, RX, X5, GLE, Q7, etc. are more the XT5’s competitors which is the mid-sized luxury SUV segment.
Second, the article is saying that Cadillac as a brand was only up 3% in NA in 2015 not the SRX. The SRX did very well last year and was up 28.5% year over year compared to 2014.
Agree that brand perception is key in the luxury market but this pricing strategy allows for more people to get into this vehicle with is good for Cadillac period.
Cadillac is not trying to be a niche player Bentley or Rolls Royce and sell a very small number of only high priced vehicles.
Cadillac wants to be a volume player like BMW, Lexus and MB. To do that they need to dramatically increase their sales volume meaning models in many segments and at various price points mostly lower end.
You don’t think that BMW sold 346,000 units for 2015 in the US and they were all 7 Series and X7s do you? The vast majority were 3 Series and X3’s along with having a model in every category.
The competitive pricing strategy is the way to go.
I quoted as it was written and your link will prove it out.
These are all mid sized CUV models and they all are in a similar segment only divided up by price for the most part and features.
Cadillac is not going to be mass market volume like some try to be at lower prices like Lexus and Lincoln.
Cadillac is going moderate lower volume like Benz and BMW but without the need to address all price ranges in that segment since they have the rest of GM to rely on for other profit needs. Cadillac has an advantage BMW lacks other brands unless you want to consider Mini and Rolls with their limited volumes.
Bentley is not really a Niche player anymore either. They are priced to be a common sight here even in the dead of winter. Used to be you rarely saw one now I park next to them covered in Salt and Snow at the mall.
My type o on the percentages was wrong but it still represents what Cadillac is doing.
My perception of what is going on at Cadillac is based on what I have read they are doing and what they have said. They have made it clear they are not out to beat anyone on total volumes. They are out to increase profits and sell more expensive and world class better cars. They fully expect to not sell the high numbers they sold in the past as they had to just to make money at the lower prices.
You can agree or not but that is just what they have clearly indicated as their path. So if you have a problem with that address Johann not me.
I never said they were going to be Rolls and Bentley but they can and will sell lower volumes and make more money doing it. The bottom line here is Volumes at the higher price are not as required as they are for a car selling for much less. Building a car like a Cadillac takes about the same time and man hours from design, engineering and assembly. The major difference is content. This is why these cars are so much more profitable than anything this side of pick up trucks.
Add that to the GM lines they also sell at Chevy and Buick and it helps leverage the development cost over the whole company. When you can build a Camaro at the same plant as a ATS and CTS it really is a help to all three cars. Also they can share the platform and leverage the cost even more. At BMW they need the volume as they have no one to share development cost with.
At the rate things are going BMW needs a dance partner to remain independent. They do not move enough cars globally to remain independent. This is why they have been working with Toyota and may work with others. Cost are high even for the largest but the smaller companies they will have to merge or share cost in some way or vanish.
Talk this week that there may only be 3 independent Automakers from japan when the dust settles.
We have yet to see the last automaker die.
I do not disagree with your economies of scale analysis and that Cadillac has some advantages compared to BMW and MB because they can spread engineering and development costs out with Chevrolet and Buick however most certainly Cadillac is looking to get their volumes up to as much or higher than they were in the past.
We all know that luxury models have a higher per unit profit margin than non luxury models which is why even Hyundai is getting in on the luxury party.
Cadillac is absolutely chasing volume along with increasing their profit per unit as well. What Cadillac has said is that they would not try to gain volume by heaping on incentives or relying on fleet/rental sales.
Yes there will constriction in the auto industry in the next 10 years or so as manufacturers face ever increasing costs to meet mileage, safety and technology requirements. GM has the resources and the scope to go it alone but they too will need to collaborate as seen with their partnership with Honda on fuel cell vehicles.
The Bloomberg article not withstanding I think Cadillac I on the right track and their pricing strategy will serve them well.
While you speak the truth on profits you are incorrect on Cadillac chasing Volume at all cost. Why do I know this? Well the CFO made this clear a couple years ago when they started the rebuilding of Cadillac and it has been reinforces with the other people who have come to Cadillac.
This was quoted on many web sites including here.
“We’re not after volume at all costs, we’re after building the brand, we have a lot of opportunity to grow the business from a volume point of view, but it’s not a purely volume-driven strategy, we have to grow the business a very orderly and profitable way. We pay close attention to what all of our competitors are doing, we make sure we understand what’s going on in their businesses, but we have our plans and our strategies, and we’re executing to those while taking into account the competitive dynamics in the marketplace.”
Read more: http://gmauthority.com/blog/2013/07/gm-cfo-dan-ammann-cadillac-is-critically-important-to-gm/#ixzz40AHsOSnL
What he is stating and has been since explained that they are profit focused and will use controled volumes as needed. But the days of building a ton of cars just to make a profit are not there. They first will make the brand profitable and sell it to the degree that they can control volumes to make money but protect the brand.
The bottom line is not to put a Cadillac in every driveway as it it used to be but to sell more expensive cars in controlled volumes to protect and build the brand image.
The fact is Lincoln, Lexus and Genesis will be whored out to sell as many as they can at lower prices. They need volume to make the money and be damned with building brand image.
Yes GM will work with others to control cost. But i n their case it will be by choice vs. need. They are one of the most tech focused companies on the planet and they can offer to sell or work with who they want to work with controlling the situation.
Where as some companies will have to join to remain independent and or survive GM will do so at their will for profitability and only share what or work on what they want to do.
Simply said GM is one of the few like Toyota and VW that could go it alone but they all will pick and choose their cost savings.
The bottom line is GM will sell the volume that best suits Cadillac to build the brand and image. They will be reliant on profitability of the product and not the volume that they used to do. This will mean selling less cars and make more money doing do. Now if markets and some products demand more volume due to better sales they will add volume but not to the point that they cheapen the brand.
GM for too long tried to sell Cadillac like Chevy’s and you can not do that. They have learned to control volumes and increase profitability.
So I agree with part of what you say but the other parts is not matching up with what Cadillac has stated clearly.
I agree that the philosophy is not volume at all costs however do not get it twisted that Cadillac is not chasing volume. They are not satisfied as 6th rank among luxury brands in US sales as they were in 2015.
Cadillac may not put much emphasis on the low end of the market occupied by vehicles like the X1, 1&2 Series, A2, B Class, etc. but they are most certainly chasing volume and market share.
Yes Cadillac has to be sold and marketed like a luxury brand and not like a Chevy and the dealer experience is one area that they can really improve.
It would be great if they could increase the MSRP by a few hundred dollars to absorb the cost of getting one in a color that’s not silver. If silver was actually the color I wanted (and it’s not!), I would feel judged by other XT5 owners for getting the “cheap” standard color.
The XT5 has a starting price of $39,900, but understand that’s for a “base” vehicle. Current base SRX doesn’t even have leather seats. Step up to a XT5 Luxury with a few options like, AWD, crystal White Tricoat paint, nav and 20″ wheels and the price is well over $50,000 in fact its right about $55,000. Take another step up to a Premium Luxury model and add only Crystal White Tricoat paint and the price is $56,300. Granted the 20″ wheels and nav are standard on the Premium Luxury but there are a lot of additional options available, some cost $2500-$2600. It would be easy to take a AWD Premuim Luxury to $60,00 or over…That’s too damned expensive for this car. My 2012 SRX Performance Edition with all the stuff had an MSRP of $49,000. The XT5 that I will probably buy at the end of this year will have an MSRP of around $58,000. It will probably be nicer and possibly better than my 2012 SRX, but that’s a big jump in price. Maybe too big.
I think the price point is just right for this segment. Similar sized vehicles from other manufacturers are significantly higher.
They are all too damn expensive. But in this class where they are looking to perform that is key to the whole deal.
They want to make more exclusive and distinct cars. They used to take a Chevy Caprice and re body it into a Fleetwood and that did not work all so well.
The fact is some folks are going to get cut out as they can no longer afford a Cadillac but then that is what Buick is here for. They will fill that higher volume gap and sell more car that may share more with Opel and Chevy.
See that is why Cadillac is working the lower volume higher price angle. They may sell less cars but they may make more than twice the money on what they do sell.
Also making it so not just anyone can own one will help image. There has been to many Cadillac and 3 series BMW parked in front of trailers over the years.
Porsche tried in the 80’s to sell a bunch of lower end models in the 924-944 and it increased volumes to a high total but it did not help 911 sales where all the money was. It did a lot damage to the brand. This is why they killed the low cars and later went to the higher priced Boxster but yet not over do volume.
The only thing Porsche has whored out is the SUV line as you can get away with that a little better as that is how that class is by nature but yet they are still getting the higher prices as even the small one is not cheap.
The XT5 is priced for the market and will do well. Remember Cadillac still has a sub XT5 crossover on the way plus one bigger as well.
How can you say Cadillac is not chasing volume with the breadth and scope of products they are planning with their $12B endowment?
The XT5 is on a unique architecture so it is not a rebadged Chevrolet. The difference with the Caprice/Fleetwood is that Chevrolet got that chassis first.
Agreed that Cadillac has done it correctly with the pricing on the XT5. They are not at parity with most of the other luxury brands and have to earn the reputation.
Cannot be burning bridges totally with prior customers, big problem with CTS even though we understand it is not the “same car”, in fact is far superior.
Have not seen ATP on Cadillacs since November, but ATP for SRX back then was only $39,935. Even with couple thousand incentives, not a lot of loaded vehicles being sold. Big price increase would have been devastating for the XT5.
Earn the reputation and the prices and the customers will come. Side note, saw a XT5 at auto show this week and it is an extremely good-looking vehicle!
The truth is they are not chasing volume by each model but they are going to do so with a wider range of models. There is a difference.
The XT5 is just a modified platform from similar ones used for other brands. It just shows the flexibility of that platform. The old one was the same too as it was not identical to the Terrain and Nox though it shared much of the engineering.
Yes the Caprice Fleetwood was a Chevy first and that was my point glad you got it.
That was what was wrong as you can dumb down a Cadillac to a Chevy but not prop up a Chevy to a Cadillac. It is a one way street.
You also can’t discount or rebate your way to the top of the segment. Controled volumes of multiple models is how it is done. You may offer a lot of models but no sell a ton of each and everyone.
A $9,000.00 jump for a nicer vehicle that’s 4 years newer don’t seem like a too bigger jump to me. Factor in a better quality vehicle with better quality interior and inflation I would say that seems about right for a luxury vehicle. Even some of the cheapest vehicles have gone up $2,000- $3,000 dollars in that period so I would think the percentage of increase given the price difference is about the same.
Cadillac’s XT5 should continue in the success of it’s predecessor as far as sales go because $40K for a V6 Cadillac is a lot of value given how the XT5 in the Chinese market features the usage of the 265 horsepower turbocharged 2.0L DOHC-4v 4-cyl and depending on how sales go in China, one might even suspect the possibility of the LTG turbocharged 2.0L 4-cyl coming to the US especially if it’s $2-3K less expensive offers similar performance and better mileage.
You could be onto something there. With Cadillac putting the 4 cylinder in the CT6 it would then not be out of place in the XT5.
While this pricing seems on target and both the xt5 and ct6 look like great cars. Cadillac really needs to upgrade the dealership experience, from the sales end and the service end in order to really remake its image. I say this based on years of experience owning many Cadillac’s, as well as having owned a couple Acuras and an Audi. Currently in the market for a crossover of this type, but the dealership experiences I’ve had have me leaning toward something other than Cadillac this time around.
This pricing seems on target to me and both the xt5 and ct6 look like great cars. BUT, Cadillac really needs to upgrade the dealership experience, from the sales end and the service end in order to really remake its image. I say this based on years of experience owning many Cadillac’s, as well as having owned a couple Acuras and an Audi. Currently in the market for a crossover of this type, but the dealership experiences I’ve had have me leaning toward something other than Cadillac this time around.
When I read things like the above it shows that Cadillac ‘s dealerships have work to do in helping build the brands image . You can sell quality built products but if your experience with the service side of the business isn’t good you will loose customers . But as is the case with a more upscale portfolio the clientele need to be treated as a partner in the purchase . It may be that this is something that is a work in progress . I know my Cadillac dealership has changed the way they do business . Not only are you treated like someone special , the building and atmosphere in the waiting room is all new . In fact my salesman that Iv’e known for 10 plus years always comes to talk to me to make sure I am being taken care of .
The pricing of the XT5 is just about what I expected . It’s in the range that current customers won’t suffer sticker shock when looking to trade in their SRX . A mistake made with the CTS and not repeated . This model will more than likely sell the same as the old model . And it will sell in volumn if Cadillac didn’t want to sell a lot of these they wouldn’t offer it in four trim levels . There are some folks that KEEP writing that Cadillac won’t sell their vehicles in high numbers like in the past . Johan stated two months ago that he wanted to increase market share .
You have to remember that the share will decrease in the states , but their vehicles are now selling more overseas.
Cadillac is designing their vehicles with that in mind . Plus , he also said that the sub-midsize CUV’s and ATS’s is to get MORE people in their cars with the hope Cadillac can keep these new people as customers . And if these cheaper Cadillacs are designed right and quality built into them they will move higher into their other models that you won’t see in ” trailer parks ” , or Walmart or the drive thru at McDonalds .
So some sun shades may be in order here if it bothers people to see Cadillacs in these type of venues . 😉 .
Agree that in order to get market share you have to increase volume. Their product push suggests that volume/market share and therefore relevance in their focus.
Nothing wrong with seeing Cadillacs in trailer parks, Walmart or McDonalds drive thru, you never know who has money.
Now in Europe (Taking a pollution laws made for them) Premium German brands Audi BMW Mercedes are making the same mistake that Cadillac from 70’s; lower the cost and quality of the cars to sell as many cars and destroying image and prestige.
Cadillac at the same time, is making the product quality and appreciated, and is doing well, but the process will be slow, this thing is mature year after year, now Cadillac is a way, after 5 years will be otherwise most important and serious.
Let still working quality technology and good finish on Cadillac cars
The almost $9,000 jump to AWD is what will really hurt sales in my opinion. Compare that to the biggest competitor: the Lexus RX350, which it will only cost you $1,400 more for AWD. There is absolutely no reason for GM to charge 6 and a half more times for AWD than Lexus. Having AWD is a must on the east coast and all the other states that get snow. If they are pricing the base at $39k in order to sell, it seems foolish to turn off a huge percentage of the customer base because of the $9,000 premium for AWD.
It appears the X% is priced well but it is still number 5 against it’s peers
Snappy car but when you want to be number one – or do you – appears you have agreed to be number 5 or maybe 4 but the owners want o feel like number one.
I think a Cadillac should have most every option even at it’s lowest level. Save things like collision avoidance or radar cruise control as an upscale option. I have a $50K 2013 SRX Premium and it has most every thing you could want. I also have a $49k 2014 ATS Performance. The ATS doesn’t have the heated and cooled seats, the heated steering wheel or the lane avoidance system that displays cars in my blind spots. This to me is a big negative, Cadillacs have always been known for having all kinds of features going way back. When I see a Base or Luxury level Cadillac SRX without even fog lights I cringe. My son’s Toyota Camry at $20K less in price has all these features.