Luxury auto boom leaves Cadillac behind

The brand has seen sales slide in the first half of the year. Analysts say it's tough to compete with German vehicles right now.

By MSN Money Partner Jul 8, 2014 2:44PM
Credit: © Shannon Stapleton/Reuters
Caption: The grill of a Cadillac is seen inside the showroom of the General Motors Corp.’s Harlem Auto Mall in New YorkBy Phil LeBeau, CNBC

Don't tell Cadillac dealers this is one of the best years ever for luxury auto sales. 

MercedesBMWLexus and Audi are all outpacing the overall growth in auto sales, but Cadillac has the dubious distinction of being the only mass market luxury auto brand where sales are down in the first half of 2014.

"This is a tough time for Cadillac," said Dave Sullivan, an analyst with Auto Pacific. "They're not bad vehicles. In fact, Cadillac is doing the right things. Unfortunately, they are going after the same buyers as the Germans and right now the Germans are very strong."

In particular, Audi and Mercedes-Benz are thriving in the entry level luxury market where the Audi A3 and Mercedes CLA Class have done well in the first half of this year. By comparison, the Cadillac ATS, which has outsold the A3 and CLA individually this year, has seen sales slump 21.8 percent, according to the research firm Autodata.

So why have Cadillac sales slipped 1.2 percent this year?

General Motors (GM) executives say nothing is wrong.

Cadillac still has an average transaction price of over $49,000 and the decision to cut fleet sales of Caddy's to rental car firms and corporations has weighed on overall sales.

That said, here are a few reasons why other luxury brands are driving past Cadillac when it comes to U.S. sales.

Mercedes, Audi winning entry-level battle

A year ago, the ATS was the engine driving Cadillac sales up 22 percent. It also had far less competition.

At the halfway mark of 2014, the Audi A3 and the Mercedes CLA Class have combined to outsell the ATS.

Some of that may be due to Cadillac CTS customers coming off of their leases and deciding they don't want to pay more to renew a CTS lease.

"People are coming off CTS leases and the new CTS is more expensive so they're moving on or deciding they don't want the ATS which is a smaller car," said Sullivan.

The entry level cars are not the most lucrative luxury models, but it's the segment where automakers are waging a heated battle. Audi has leveraged the launch of the A3 and an ad campaign featuring comedian Ricky Gervais to grow the German brand's overall sales.

In fact, Audi has now passed Cadillac to become the fourth largest luxury brand in the U.S.

Cadillac executives admit the ATS is facing stiffer competition.

"We've never had a product like the ATS," said Dave Caldwell with Cadillac. "We've got credibility growing with entry level cars, but it will take time until we beat the Germans at their game. You have to earn and win over buyers. That's going to take time."

ELR sales

When Cadillac rolled out the extended range electric ELR earlier this year, it was accompanied with an ad campaign featuring an upscale, ultra-confident middle age father who talked about "creating your own luck". The ad ends with him unplugging his ELR before driving off.

GM paid big bucks to run the ad on Super Bowl Sunday.

Did the investment pay off?

This year, Cadillac has sold just 390 ELR models, which start at $75,000.

"Is the ELR a total flop?" asks Sullivan. "Yes. The only people I see driving them are GM employees."

Caldwell downplays slow ELR sales by calling it a niche model.

"The ELR is a very new idea. We have a lot of work to do with it, but this is a car that says to the consumer, 'these guys are up to something'," he said.

Profitable and booming in China

While Cadillac sales may not be keeping up with the competition in the U.S., the brand is widely believed to be very profitable. Officially, General Motors doesn't break down the profitability of its individual brands.

However, analysts point to the fact sales of Caddy SUV's and crossovers are up more than 14 percent. SUV's and Crossovers are among the autoindustry's most profitable vehicles.

Sullivan adds that the redesigned SRX and a new, smaller crossover will give Cadillac a shot in the arm when they hit showrooms over the next two years.

"I'm not too concerned about Cadillac," said Sullivan. "It's all about the upcoming battle in luxury crossovers and Cadillac is very strong in that area."

Meanwhile, Cadillac sales are booming in China, where the demand for luxury autos remains red-hot. By the end of the year, Cadillac expects sales in China to jump 40 percent.

"China sales will be up significantly, but we're still a niche player in that country," says Caldwell.

As encouraging as China is for Cadillac, the U.S. remains its biggest market. Despite lagging sales this year, Caldwell believes the brand is positioned to rebound.

"We have a cool brand with a strong heritage," he said. "We've graduated to the next level of competition. We have to win head to head when we go up against other luxury brands and I think over time we will."

More from CNBC

Tags: GM
Jul 8, 2014 3:42PM

It couldn't possibly have anything to do with the price?  I am speaking of the Escalade.  We stopped in to trade our 2008 Escalade. The salesman said they had no 2015's in yet, any day now though.  What about price.  "80,90 and 100"  I asked for an explanation and he said quite plainly 80 thousand , ninety thousand and 100 thousand are the three models.

It is not I cannot afford one, but I won't spend that kind of money on a truck. It just isn't worth it.  We bought a 2015 Yukon Denali it is great and they can cross me off as a caddy customer for 25 years.

Jul 8, 2014 4:06PM
A Caddy is not supposed to be a hot rod, nor a pickup or SUV. Cadillac's problem is in trying to be something it's not.
Jul 8, 2014 5:12PM
The reason Cadillac can't sell a $75K electric vehicle is because you can buy a Chevy Volt, (which is the identical car mechanically), for less than half the price! The Escalade is priced about $15K more that a full tilt Suburban (which is way over priced in my opinion) and the XTS is about the same price difference compared to a new Impala (which is based on the same platform). I expect to pay more for a Caddy than a Chevy, but you'll never convince anyone that there is enough leather, wood and/or carbon fiber trim in the ELR to justify a $40K price differential with the Volt! 
Jul 8, 2014 4:52PM
Cadillac built its name and market on big heavy luxury cars.  They are trying to sell to the Starbucks crowd who are all about " German engineering",  a myth sold to the same fools who drink that swill.
Jul 8, 2014 4:27PM
The cadillac no longer looks like a luxury vehicle.   Now it is just an ordinary looking vehcile with no distinction of being high class.  Just as the Lincoln does not.  A person has to look at the vehicle name to see what model it is..  Cadillac used to be distinctive and luxurious.
Jul 8, 2014 5:00PM
Cadillac raised the price of the CTS $10,000 in one year.  Traded my 2011 CTS for a Buick Lacrosse.  Loaded it was sticker $41,000. It was $20000 cheaper and basically the same engine and trans and lots of bells and whistles.
Jul 8, 2014 6:43PM
It's the depreciation - which is horrible. If I'm going to spend $70k on wheels, I want it to be worth more than $25k in five years.
Jul 8, 2014 6:58PM
I remember when Cadillacs were Cadillacs.  They really had no equal. Even though Mercedes and BMW offered vehicles at the same time, they were marketed to different segment than the Cadillac customer.

Now, Cadillac wants to be a Mercedes.  Cadillac wants to be a BMW.  Well guess what?  Mercedes and BMW already own that market.  Cadillac will always be a second rate wannabe in that market segment.  They need to go back to the market they created and owned.  Huge tuna boats with loads of torque, a cushy smooth ride, and just about every amenity and chrome (real chrome, not plastic) doodads and at least 20 badges that say "Cadillac" or show the Cadillac Crest or "V"s.

The reason that Cadillac is struggling as a Mercedes/BMW wannabe is that Audi and Lexus already fill that role.

Go back to being an original, Cadillac.
Jul 8, 2014 7:07PM
my dad bought a 1976 coupe brand new, he had the car for about 25 years and it had 500,000 miles on it then he gave it to me and i drove it for about 1 year then it just blew up so i sold it for scrape i got about 1000 out of it the car was built like a sh$$ brick house and had no problems that was when car were cars and you could work on them yourself  
Jul 8, 2014 5:05PM
They are also a piece of junk, just look at one that's five or six years old, then look at a BMW or MB or Lexus at the same age - the imports are still holding their own and the Caddy is a has been.  Driving lights where one is out of action on a year old car, electrics needing replacing after two or three years, bad body parts failing after three or four years, moldings and assorted plastic pieces falling off and for that you get to pay close to or over $100 -- give us a break.  Oh and add to that mess you know it's going to be a part of another GM recall. 
Jul 8, 2014 5:40PM
maybe sales are down because GM only recalls after they are put on the spotlight and after so many deaths.... makes me double think about buying any GM 
Jul 8, 2014 7:22PM
The last Cadillac I had was in the shop more hours than it was on the road. I would never buy another one - ever!
Jul 8, 2014 4:31PM
One PCM, one TCM, power windows, easy and simple to service or repair AC system, power steering, power brake, power door lock, good radio and cd player, leather seats, roomy inside, 4.3 or 4.8 liter engine. That's should be enough. No need to jump in the stupid band wagon chasing after stupid clientele like others. Majority of us are working people and we need a reliable decent car to go to work everyday. We don't live in the car nor to show off. MB low end cars do well, do you know why? Because there are less sh!t in it and that translates lesser problem. Make it simple for God's sake. It's just a f.__ cars. The more sh!t you put in it, the bigger the pile. Make more by sell more cars is better than make more by sell less cars.Think about it if every Americans drive Cadi "How rich would GM be?". Remember "Henry Ford's philosophy". And put your integrity and reputation before big bonus. It will pay off but it will take a while now because you've already ruined it. Old day's Cadi is a dream cars, today's Cadi even at the auction "no body wants it".
Jul 8, 2014 8:50PM

and its the same with gmc, why buy a gmc when you could buy a chevy and save 10,000 dollars and have the exact same thing.  in this day and age, maybe 2% of the American population can afford a Cadillac.  the dollar just isn't worth what it was worth 10years ago

Jul 8, 2014 4:41PM
I'm going to move to China and set up a white belt and shoe store next to the Cadillac dealer.
Jul 8, 2014 5:36PM

Maybe they needed a new focus group on the ad. It didn't bother me but I heard a lot of people flat out hate it as arrogant. Hardly the way to get customers.

Jul 8, 2014 5:23PM

Cadillac was the true leader in the luxury market back in the 60's and 70's.....................

It's an "old school" name plate that had a demographic resurgence in the mid-90's when the Escalade with chrome 26 inch rims was a fashionable and desired nameplate. Cadillac had a strong uptick in the urban markets of the US. However, those days are dwindling as the sales numbers prove.

The Gen Y' and X's along with wealthy early retirees now either want an Audi, Bimmer, Benz or a Lexus.....not a Cadillac.  

Jul 8, 2014 3:30PM
Its all about the interior. Simple as that. Styling is nice, but the touch buttons/knobs are not simple to use nor ergonomic. My older mother drives an ATS, which is almost impossible to get in and out of. XTS is too narrow to compete vs the LS460, S500, 740, etc..  Just not in the game right now.
Jul 8, 2014 4:57PM
If there was a truly Luxury car made in America by an American manufacturer, maybe they would sell.  Caddy's haven't been a luxury car in years, Lincoln doesn't make them anymore.  Give me a nice 93 Caddy for some real luxury.
Jul 8, 2014 6:04PM

A traded in Caddy would be just the thing a pimp would drive. They were known as Pimpmobiles for a reason. Now they are Gangstermobiles. .

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