Is GM's Cadillac Revival Going Off the Rails?
The Cadillac ELR coupe is General Motors' first take on a luxury plug-in hybrid. It was touted in some quarters as GM's answer to Tesla Motors , but it hasn't worked out that way: Despite a popular and controversial TV ad, sales of the ELR have been minuscule so far.
That's not a big deal in the grand scheme of things, as GM's expectations for the ELR were modest. But the ELR's dismal sales are a symptom of a bigger problem: GM's much-ballyhooed Cadillac revival has hit a rough patch. While most luxury brands have seen good growth in 2014, Cadillac sales are actually down.
What's the problem? In this video, Motley Fool senior auto specialist John Rosevear takes a deeper dive under Cadillac's hood -- and finds that the brand's problem might not be with the products it has, but with the products it's still lacking.
A transcript of the video is below.
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John Rosevear: Hey Fools, it's John Rosevear, senior auto specialist for Fool.com. It's becoming apparent that things are not going quite as well as General Motors had hoped with the Cadillac brand. There are rumors going around that Cadillac dealers are not happy with GM, that the expensive ELR plug-in hybrid coupe is not selling at all, and sales of the ATS and XTS sedans have fallen considerably this year, both are down about 22% through the first half of 2014.
Meanwhile, the ELR, which has been held up in some circles as Cadillac's first shot at Tesla Motors, has sold fewer than 400 total cars in the first six months of the year.
To be fair, the new CTS sedan is doing pretty well, and the new big Escalade SUV is off to a good start. But overall U.S. Cadillac sales are down 2% through the first half of the year, and this is in a market where luxury vehicles in general are doing pretty well.
U.S. sales of Daimler's Mercedes-Benz brand are up 7%, BMW is up 12%, Volkswagen Group's Audi brand is up 14%, and Toyota's Lexus is up 17% in the U.S. through the first half of 2014, so it's not like Americans aren't buying luxury cars.
But they aren't buying Cadillacs, at least not as many as GM would like.
Now, to be fair, the problem may not be with the Cadillacs themselves. I talked to Cadillac spokesman David Caldwell about this a while back, and he pointed out that a lot of the growth in the luxury segment is coming from compact and midsize crossover SUVs. BMW's X3 is up 53% this year, and overall U.S. sales of BMW's SUVs are up 21%, and Mercedes' small GLK-Class is up over 18%.
Cadillac doesn't currently have a compact SUV, and the brand's midsize SUV, the SRX, is nearing the end of its model cycle -- but sales of the SRX are in fact up over 20% this year, which lends some support to the idea that Cadillac's problem is its model mix, not its cars.
But there are reasons to be worried here. It looks like the buzz has worn off Cadillac's compact ATS, when it was launched it was pitched as a rival to BMW's 3-Series, but a check with Edmunds.com not long ago showed that 3-Series shoppers aren't really considering the ATS. And the XTS isn't a serious rival to the big BMWs and Mercedes, the 7 Series and the S-Class, it's kind of its own thing, and it mostly sells against Lincolns and other big GM cars like the Chevy Impala.
Now, Cadillac has several more products under development, they've hinted pretty loudly that there's a big new sedan coming, a rear wheel drive car that will compete with the S-Class, and there have been hints of more crossover SUVs as well, they could certainly use a smallish crossover SUV like the BMW X3 or like the new Lincoln MKC that Ford just launched.
And there's another issue, which is that Cadillac's leader, GM senior vice president Bob Ferguson, used to be GM's Washington guy, and he has kind of been called to duty to deal with Congressional folks who are upset over GM's recall scandal.
So there's a question of leadership here, and sales aren't keeping up with rivals, and I wonder if some of what's going on here really can be traced to the recall scandal, overall GM sales have mostly held up fine despite all the recalls and outrage, but maybe this is where it's starting to show. This project of turning Cadillac into a thriving global brand is very important to the long-term case for GM stock, so we'll be watching this closely. Thanks for watching.
The article Is GM's Cadillac Revival Going Off the Rails? originally appeared on Fool.com.John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends BMW, Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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