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Bad News for Ford's and General Motors' Luxury Brands
[url]www.fool.com[/URL]
January 4, 2015
By Daniel Miller


Sales of luxury vehicles are, in the somewhat wise words of Randy Moss, "straight cash, homey." (Take that, everybody who didn't believe a random Randy Moss quote could be used in an investing article.) Meaning, of course, that sales of luxury vehicles are critical for automakers' success in the U.S. and globally. Luxury vehicles drive significantly higher average transaction prices, and fatter bottom-line profits.

With that in mind, Ford Motor Company and General Motors received some bad news regarding their luxury lineups recently.

Walking away
The graphic on the left, from the hardworking crew at Edmunds.com, shows what people buy after returning their luxury ride. First, the Porsche statistic should probably be ignored: If a consumer has purchased a Porsche, chances are their days of driving a non-luxury or mass-market car are over.

Now for the bad news. Four luxury brands had consumers trading in their luxury ride for a mass-market vehicle more often than not. Leading the exodus charge was Lincoln, with Ford's struggling luxury brand seeing nearly seven of every 10 consumers trade in its vehicles for a non-luxury ride.
The rest at:

http://www.fool.com/investing/gener...-ford-motor-general-motors-luxury-brands.aspx
 

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This is simply over a single period of time.

Without knowing the direction of movement or trend for each auto model, this info has much less value as far as investing goes.
 

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also the average age of Lincoln traded for a NON LUX brand is 9 Years I would assume the 9 YO Lincoln is NOT Luxury anymore compared to "normal" cars
and the AGE of car is quite OLD for ALL brands going to NON LUX VS the ones that re bought LUX are a fair amount newer (caddy 7.9 VS 4.9)
 

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There's a lot of ways to read that graph without knowing the data that actually went into it.


Both Lincoln and Cadillac numbers can be explained but their current upswing in price, assuming the data that went into it is relatively recent.
They both don't attract typical "luxury customers." So moving on from a luxury brand because they've been priced out would be a common effect.
 

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Both Lincoln and Cadillac numbers can be explained but their current upswing in price, assuming the data that went into it is relatively recent.
I think Lincolns prices, as an average, have gone down in that last couple of years. The MKZ and MKC represent "Entry Level" product. The Town Car is gone and neither the MKS or MKT sell in numbers (at retail) high enough to have a real effect. The Navigator is doing a bit better after its MCE, but I don't think prices were raised. I could be wrong about that.

Cadillac, on the other hand, has indeed seen a hike in the average sticker price and price-paid recently.
 

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Does this graph surprise anyone?
No.

Cadillac no longer offers the same vehicles it once did. Thus, the buyers it once had no longer have anywhere to go for the same size/price/luxury offerings they once found at Cadillac.

Thus, they no longer have access to the same "class" of vehicles, and must move downmarket.
Cadillac doesn't need to move down market. They need a new class of customer.
 

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There's a lot of ways to read that graph without knowing the data that actually went into it.


Both Lincoln and Cadillac numbers can be explained but their current upswing in price, assuming the data that went into it is relatively recent.
They both don't attract typical "luxury customers." So moving on from a luxury brand because they've been priced out would be a common effect.
This is true from what I've observed. And I add my own family's experience. The need or want for a luxury brand is sort of diminished when moving to a location on a 1.5 mile gravel road. A Cadillac car was no longer wise.
 

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Another thing this graph and article doesn't tell you is how many former Cadillac buyers purchased either a Buick or a GMC model, both of which are set up to pick up many "old" Cadillac buyers... I could see this as a very real possibility, though I'm sure those brands certainly didn't capture all the lost Cadillac buyers...

Now, that's not good for Cadillac, but it may not be all bad for GM. As mentioned by others, Cadillac must target those customers who are willing to pay for their higher quality new products. It will take time, but I'm convinced that it will eventually happen, if they continue to build ultra-competitive models like they now have with the Alphas and the Escalade, as well as adding more high quality CUV's and, of course, the Omega vehicles...
 

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Another thing this graph and article doesn't tell you is how many former Cadillac buyers purchased either a Buick or a GMC model, both of which are set up to pick up many "old" Cadillac buyers... I could see this as a very real possibility...
Now, that's not good for Cadillac, but it may not be all bad for GM...

yup, esp IF(when?) Buick/GMC ATPs = the previous Cadillac ATPs


btw
I believe this: is the Edmunds article-originator
 

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Another thing this graph and article doesn't tell you is how many former Cadillac buyers purchased either a Buick or a GMC model, both of which are set up to pick up many "old" Cadillac buyers... I could see this as a very real possibility, though I'm sure those brands certainly didn't capture all the lost Cadillac buyers...

Now, that's not good for Cadillac, but it may not be all bad for GM. As mentioned by others, Cadillac must target those customers who are willing to pay for their higher quality new products. It will take time, but I'm convinced that it will eventually happen, if they continue to build ultra-competitive models like they now have with the Alphas and the Escalade, as well as adding more high quality CUV's and, of course, the Omega vehicles...
Or are some of these people stepping into non-luxury $70,000 Suburbans???? Or top end pickups?
 

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Or are some of these people stepping into non-luxury $70,000 Suburbans???? Or top end pickups?
Exactly. A Titanium Fusion or Platinum Explorer are both more luxury than any Lincoln more than a few years old, so what this 'study' shows isn't necessarily a catastrophe. Sales of Lincoln, at the bottom of the list, are up 15% this year, so if they're bringing in new customers from other brands then I'd say they're doing something right.
 

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This is true from what I've observed. And I add my own family's experience. The need or want for a luxury brand is sort of diminished when moving to a location on a 1.5 mile gravel road. A Cadillac car was no longer wise.
I did just the opposite. I too moved to a house with a long gravel driveway located on a dirt road. However, I dumped my Impala and picked up a BMW. To each their own!
 

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Bad News for Ford's and General Motors' Luxury Brands

Bad News for Ford's and General Motors' Luxury Brands
Fool.com
By Daniel Miller
January 4, 2015 |


More detailed version (edmunds.com) in PDF

Sales of luxury vehicles are, in the somewhat wise words of Randy Moss, "straight cash, homey." (Take that, everybody who didn't believe a random Randy Moss quote could be used in an investing article.) Meaning, of course, that sales of luxury vehicles are critical for automakers' success in the U.S. and globally. Luxury vehicles drive significantly higher average transaction prices, and fatter bottom-line profits.

With that in mind, Ford Motor Company (NYSE: F ) and General Motors (NYSE: GM ) received some bad news regarding their luxury lineups recently.

Walking away

The graphic on the left, from the hardworking crew at Edmunds.com, shows what people buy after returning their luxury ride. First, the Porsche statistic should probably be ignored: If a consumer has purchased a Porsche, chances are their days of driving a non-luxury or mass-market car are over.

Now for the bad news. Four luxury brands had consumers trading in their luxury ride for a mass-market vehicle more often than not. Leading the exodus charge was Lincoln, with Ford's struggling luxury brand seeing nearly seven of every 10 consumers trade in its vehicles for a non-luxury ride.

You could interpret that statistic in a few different ways. A harsh way would be to say that Lincolns are viewed so poorly in comparison to more successful luxury brands that people would rather save money and drive a regular Ford, or another mainstream brand's vehicle. A less harsh view would be that because Lincolns don't carry the high transaction price found with a Porsche, a consumer walking away from Lincoln in favor of a non-luxury brand isn't making as significant of a change.

Either way, the news isn't good for a luxury brand trying to reverse its sales slide.

Why it matters


Consider the profitability difference between Volkswagen's namesake brand and its Audi luxury brand. Volkswagen was responsible for more than three times the vehicle sales that its Audi brand sold last year, yet Audi generated 73% more operating profit than the Volkswagen brand.

Looking at a wider picture, luxury sales represent between 10% and 11% of auto industry sales, yet represent roughly 18% of generated new-car sales revenue, according to Edmunds. Digging even further, Ford estimates that the luxury segment's 10% to 11% of total industry sales generates roughly a third of all profits.

Consumers walking away from Lincoln and Cadillac at such a high clip is just bad business for U.S. automakers. That's especially true when you consider that luxury sales are less affected during tough economic times and don't -- or shouldn't -- directly cannibalize sales from the mainstream brand.

More at link
 

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I think Lincolns prices, as an average, have gone down in that last couple of years. The MKZ and MKC represent "Entry Level" product. The Town Car is gone and neither the MKS or MKT sell in numbers (at retail) high enough to have a real effect. The Navigator is doing a bit better after its MCE, but I don't think prices were raised. I could be wrong about that.

Cadillac, on the other hand, has indeed seen a hike in the average sticker price and price-paid recently.
For the Navigator:
2014 Starting Price 56,165
2015 Starting Price 61,920

Not as big of an increase as the Escalade. But the Escalade is still killing it sales wise which is extremely impressive considering how much the price as gone up.
 

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Re: Bad News for Ford's and General Motors' Luxury Brands

Theoretically, it is possible that Chevrolet owners trade up to a Cadillac, mirroring the trend, and perhaps set the balance straight... Premium is where the earnings are. Psychologically it works like this: an Audi is expensive, less people can afford one, so Audi is a luxury article. In some instances the Germans are so successful that some of their luxury models outsell similarly sized, cheaper models from other brands. BMW 3 series outsold (still outsells?) the Ford Mondeo in the U.K. TopGear made special mention of this phenomenon in one of their shows.

Germans cars may even become a little cheaper since the euro is falling against the dollar.
 
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