American Automakers Revamp Their Luxury Brands To Take On Germans

by Trefis Team
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U.S. automakers such as General Motors (NYSE:GM) and Ford Motors (NYSE:F) are making concerted efforts to improve their standings in the luxury car market. Luxury brands of American car companies, mainly Cadillac and Lincoln, do not even feature in the top three in the U.S.

Last year, GM had pledged to double the sales of its luxury brand Cadillac in the next 3-4 years through new product introductions and model refreshments. In total, Cadillac will introduce 10 new models or vehicle redesigns. Although its sales were flat in 2012, they had begun to pick up after its new ATS and XTS were introduced. Similarly, Ford is in the process of reinvigorating its Lincoln brand by introducing four new models in the next four years (including a new MKZ sedan). It has also increased its marketing spend with the company buying an ad spot in Super Bowl.

See our complete analysis for Ford Motors here

Not Just America

Furthermore, given America’s cultural impact, the more successful they are domestically, the easier it becomes to connect with customers internationally. Right now, the world’s top luxury automakers are channeling their energies towards China. The luxury car market is booming with sales surging 18% to 1.2 million units in 2012. While the world’s most populous nation might not be able to repeat the astronomical growth rates witnessed in the past (the luxury market size jumped 70 percent and 34 percent in 2010 and 2011 respectively), the incremental sales figures are still significant enough to lure the world’s top automakers to vie for a share in the luxury car market. [1]

Apart from introducing small cars for the Chinese market, Ford will also debut Lincoln by 2015. Similarly, GM recently announced its decision to introduce the Corvette car in China. [2]

There are also reports that the company might introduce the ATS and ELR plug-in by the middle of next year. GM will also boost the Cadillac dealers by 25%. Most of the cars sold by the company through its joint ventures currently are minivans and small cars which tend to have lower margins (Cadillac sales only constituted 29,000 out of the total 2.55 million cars sold) [3]

Luxury cars, on the other hand, have better margins and therefore it is no wonder every major luxury automaker is revamping its portfolio of more expensive cars. However, luring Chinese customers to buy American luxury cars will still be a challenge as the newly rich generally prefer the more recognized German brands even though the others might offer a better value.

We have a $13 price estimate for Ford, which is about 5% lower than the current market price.

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Notes:
  1. German brands reign in luxury market, January 14, 2013, chinadaily.com []
  2. Corvette Weighs Trip Into China, January 14, 2013, wsj.com []
  3. Cadillac may introduce ATS, ELR in China by mid-2014 -GM exec, December 19, 2012, bloomberg.com []
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