Photographer: Andrew Harrer/Bloomberg
Cars

Cadillac May Be Cooler Now, but It Still Really Needs a Crossover SUV

The carmaker's efforts to re-brand itself as downtown and hip may be showing signs of success, but they'll need a lot more to move the needle.

This year at the North American International Auto Showother than an appearance by Bentley and a few off-site meetings with executives from Lamborghini and Rolls-Royce—luxury automakers proved scarce.

Jaguar, Land Rover, Porsche, and Tesla, among others, skipped the show altogether in favor of more glamorous events later this year. They didn't even have stands. 

So it made sense that Cadillac dominated the show floor in Detroit, situated across from German powerhouse Mercedes-Benz in a glitzy and massive corner stand overflowing with American-made coaches. The pricey real estate came encircled with high white, wood-like architecture and a gleaming Escala sedan set like a crown jewel at the center of it all.

This has proved a strong year for Cadillac, at least when it comes to worldwide sales. The 114-year-old brand saw global sales rise 11.1 percent over 2015, with monthly global sales up by double-digit percentages in every month since June 2016, consecutively. Global sales were significantly higher than they were, say, 10 years ago heading into the auto industry’s worst depression in decades. In 2007, Cadillac sold 241,000 units globally; in 2016, that number topped 308,000. Since 2007, Cadillac global sales have increased 27.8 percent.

The success is not lost on Uwe (pronounced OOH-vuh) Ellinghaus, the chief marketing officer who joined Cadillac in 2014, months before Cadillac boss Johan de Nysschen joined to lead the team tasked with revitalizing the comatose brand. But talk to Ellinghaus for more than a minute, and he’s more likely to turn the conversation to his efforts at reaching an ever-younger audience rather than holding on to the established one.

While Audi, BMW, and Mercedes-Benz continue their Teutonic death-match to be first in the volume luxury segment, Cadillac wants to be the freshest.

A General Motors Co. (GM) Cadillac Escala concept vehicle sits on display during the 2017 North American International Auto Show (NAIAS) in Detroit, Michigan, U.S., on Tuesday, Jan. 10, 2017. Last January, the 2016 NAIAS featured 61 vehicle introductions, a majority of which were worldwide debuts, and was attended by over 5,000 journalists from 60 countries. Photographer: Andrew Harrer/Bloomberg

A Cadillac Escala concept sedan on display during the 2017 North American International Auto Show in Detroit.

Photographer: Andrew Harrer/Bloomberg

“Any strategy that looks at what the Germans are doing would raise just one question: ‘Why should anybody buy a Cadillac if we simply copy the German originals?’” Ellinghaus said, a significant statement from a 47-year-old German who worked for BMW for 15 years. “When you want to be No. 1, it means you cannot afford to polarize, and [thus] the cars from our three German rivals are looking more and more similar to each other. But we are Cadillac—we are American. We can take risks. We must take risks. Cadillac needs to go its own way.”

The Revolution Has Begun

Ellinghaus has led efforts to do this in a number of ways over the past three years, working with Brand Marketing Director Melody Lee to lead a team apparently completely populated with colleagues of diverse backgrounds who are 35 and under. (Cadillac’s target consumer is now working for Cadillac, Ellinghaus says.)

More notably, Cadillac moved its official headquarters to New York’s fashionable Tribeca neighborhood; it hosted fashion shows and sponsored New York Fashion Week: Mens; it opened the Cadillac House with artwork curated by the fashion-world royalty Visionaire team and a retail space with the CFDA’s latest darlings; it stopped sponsoring stuffy, boring sporting events such as the PGA Tour (the partnership ended in 2016), instead devoting 20 percent of its marketing budget to digital outreach; and, most recently, it launched an app that allows users to order and drive Platinum-Level Cadillac cars and SUVs—with all insurance, maintenance, and taxes paid, plus unlimited mileage and the ability to exchange one vehicle for another as often as you like—for $1,500 a month.

A General Motors Co. (GM) Cadillac Escala concept vehicle sits on display during the 2017 North American International Auto Show (NAIAS) in Detroit, Michigan, U.S., on Tuesday, Jan. 10, 2017. Last January, the 2016 NAIAS featured 61 vehicle introductions, a majority of which were worldwide debuts, and was attended by over 5,000 journalists from 60 countries. Photographer: Andrew Harrer/Bloomberg

The Escala is meant to show the future of design for Cadillac products over the next decade. 

Photographer: Andrew Harrer/Bloomberg

The app, called Book by Cadillac, embodies the mentality of the consumer Cadillac knows it must attract.

“The entire luxury automotive industry is still geared toward the baby boomers … [but] we need to acknowledge that the digital channel is everything to [young buyers],” Ellinghaus said. “There is a consumer for whom time and availability is worth so much more than $1,500. Time-pressured people in urban areas do not want to go to a car dealership.”

Looking at the Results

There have been some tangible results. Ellinghaus said that even while in beta form, the Book by Cadillac app translated into at least one new-car purchase, when a tester decided to buy a copy of the XT5 he had been driving via the app. And more than 40 percent of Cadillac's bestselling Escalade buyers belong to Generation X and Y. (XT5 saw global sales increase 15.8 percent for 2016; Escalade saw global sales rise 8.95 percent for the same period.)

Meanwhile, the Cadillac House sees more than 500 visitors per day, half of which stay longer than 20 minutes, and is a desired space for private events and shows. (Bloomberg Pursuits hosted an event there in December.) Since the brand launched the ATS sedan in 2012, sales to consumers under the age of 35 have doubled. In China, the average age of the Cadillac customer has hit an all-time low of 34.

Cadillac is also likely the only luxury automaker for whom its most expensive car—the Escalade—is owned by its youngest demographic. (The average age of an Escalade buyer is under 50, down incrementally in recent years and down significantly when compared with the average age of the Cadillac customer, which is 60.)

The Escala comes with 22-inch rims and “monkey-spoke” wheels, a milled aluminum grille, LED tail lights, and clean, streamlined curves from the front to the rear. The side windows run uninterrupted past the typical body pillar between the front and rear of the car.

Photographer: Hannah Elliott/Bloomberg

 

How to Move Forward

It’s only a matter of time before the generation cycle turns and new buyers, with no concept of the formerly dated Cadillac, will start buying cars. Yes, they’ll still buy cars: By 2020, 80 percent of new vehicles will be purchased by members of Generations X and Y, according to Cadillac research, Ellinghaus said.

“This cynicism about Grandfather’s Cadillac clouds only for Americans and not for others in the world—it’s only the baby boomer generation who have this attitude,” Ellinghaus said. “All of our German competitors have very loyal customers who have aged with their cars. But if I look at millennials, there is no legacy with Cadillac of grandfather’s car because when they grew up, their fathers were driving German cars. Cadillac can be cool again because the Germans have aging customers.”

Still, a Long Road Ahead

A General Motors Co. (GM) 2017 Cadillac CTS-V vehicle sits on display during the 2017 North American International Auto Show (NAIAS) in Detroit, Michigan, U.S., on Tuesday, Jan. 10, 2017. Last January, the 2016 NAIAS featured 61 vehicle introductions, a majority of which were worldwide debuts, and was attended by over 5,000 journalists from 60 countries. Photographer: Andrew Harrer/Bloomberg

A high-performance 2017 Cadillac CTS-V sits on display during the auto show in Detroit. 

Photographer: Andrew Harrer/Bloomberg

The brand still has a long way to go. The average age of a person who buys a Cadillac is still older than even that of a BMW and Mercedes buyer, which hovers near 49 and 54, respectively. And while overall global sales are up considerably, U.S. sales in particular last year were down 3 percent from 2015, even though they were up 3 percent in December year over year. 

There is some question yet whether all of Cadillac’s considerable efforts have returned any tangible results.

“You cannot convince someone that a brand is cool, no matter what you sponsor,” said Michael Harley, an analyst for Kelley Blue Book speaking specifically about Cadillac. “Coolness is something that is earned, and it generally takes a lot of time. You cannot force coolness down a consumer’s throat, and unfortunately, a lot of automakers think you can.”

A General Motors Co. (GM) Cadillac Escala concept vehicle sits on display during the 2017 North American International Auto Show (NAIAS) in Detroit, Michigan, U.S., on Tuesday, Jan. 10, 2017. Last January, the 2016 NAIAS featured 61 vehicle introductions, a majority of which were worldwide debuts, and was attended by over 5,000 journalists from 60 countries. Photographer: Andrew Harrer/Bloomberg

Cadillac is making solid cars, but experts say it needs another crossover in its lineup to help fill the gap between the Escalade, the XT5, and the smaller sedans it sells. 

Photographer: Andrew Harrer/Bloomberg

The Missing Link

Ellinghaus is the most optimistic, cheerful, and fresh-thinking executive working in the American auto industry right now. He knows better than anyone that marketing a particular lifestyle is critical for a luxury auto brand, and in this market, good products alone don’t translate into wildly successful sales numbers.

But all the marketing in the world can’t ignite sales numbers if there’s nothing to sell. Cadillac needs a catalyst—namely, a small crossover SUV.

“The greater problem Cadillac is facing now is they don’t have a lot of crossovers that meet the needs of the 35- to 40-year-old public,” Harley said. “What you need to do is to get a really, really nice premium midsize crossover. They have the XT5, but they’ve got nothing else.”

The category is doing so well, in fact, that Audi, BMW, and Mercedes-Benz continue to unravel new variants so close in design and size that it’s sometimes hard to distinguish them from one another. (Quick: What’s the real difference between a BMW X1, X2, X3, and X4 or an Audi Q3 or Q5?) This week at the auto show, all three of those brands introduced multiple crossovers aimed precisely at the young buyer. Cadillac did not.

A General Motors Co. (GM) 2017 Cadillac XTS sports utility vehicle (SUV) sits on display during the 2017 North American International Auto Show (NAIAS) in Detroit, Michigan, U.S., on Tuesday, Jan. 10, 2017. Last January, the 2016 NAIAS featured 61 vehicle introductions, a majority of which were worldwide debuts, and was attended by over 5,000 journalists from 60 countries. Photographer: Andrew Harrer/Bloomberg

The 2017 Cadillac XTS sports utility vehicle is the smaller of the two SUVs Cadillac currently sells. 

Photographer: Andrew Harrer/Bloomberg

“You can have the greatest lights and all the fog machines, but if you don’t have the right act on the stage, you’ve got a problem,” Harley said. “Cadillac has the wrong act on the stage.”

It knows. And it's working on it. Ellinghaus said a smaller crossover SUV will emerge during 2018. When that hits, the thinking goes, all the marketing and advertising will have laid the groundwork for it to become a smash hit. 

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