General Motors Company: Did You Notice Cadillac's Pricey Mistake?

As I have been warning investors of the potential disaster lurking at General Motors (GM 0.98%) due to its recall issues, I have been taking a deeper look into the company. 

More specifically, I am looking at GM's luxury lines in Buick and Cadillac, and questioned whether Ford's (F -1.39%) Lincoln line could be catching up to its two crosstown luxury brand rivals. 

More can be read about that topic in, "Will General Motors Continue Dominating Ford in Luxury?"

However, I found an interesting trend that only seemed to apply to Cadillac -- not Buick -- suggesting that there could be a specific problem tied to the brand, rather than General Motors as a whole.

From good to bad
After watching sales surge 22% in 2013, Cadillac's sales have taken a dive in 2014, down 7.3% in the first quarter and down 4.4% year to date. Its competitors -- including European, American, and Asian luxury automakers -- have all posted sales gains in the same respective time frame. Below is a look: 

Source: GoodCarBadCar.net

The question is simple: Why are sales of Cadillac down, while sales for other luxury automakers are up?

Some could simply argue that the weather hurt sales, along with the slow rollout of several key models, including the new Escalade and ATS, due out in mid-spring and late summer, respectively. 

While the slow vehicle rollout may be slightly responsible for the sales dip, the weather can't possibly be blamed. It could if other luxury automakers experienced a dip in sales. But since they're not, it's obvious that consumers are making a conscious decision to steer clear of Cadillac.

Price hikes not helping matters
This problem is rather precarious, and I've seen and heard more than a few consumers gripe about the new price hikes. But perhaps that's only one of the problems. Below I have highlighted 2014's prices versus the prices in 2013:

*The 2014 price is based on the 2015 model, set to hit dealers this spring. Source: Edmunds.com

As seen above, there have only been two meaningful price hikes this year, that being in the Cadillac CTS and the Escalade. However, in the case of the Cadillac CTS, that doesn't fully explain sales results.

The CTS has experienced the second-best, year-over-year sales results for Cadillac models through the first quarter of 2014, (admittedly however, it is still negative). The results are below:

Source: GoodCarBadCar.net 

Cannibalization and competition
So if the ATS and XTS models didn't see any meaningful price hikes -- 2.8% and 1.2%, respectively -- why have sales been absolutely crushed? In regards to the XTS, I would suspect that the CTS may be cannibalizing sales, due to its similar price point and it being the recent recipient of the coveted Motor Trend "Car of the Year" award.  

One possible theory for the drop in ATS sales is competition. After sales surged 447% year over year in 2013, the ATS has suddenly fallen from its pedestal. But when you compare the pricing points of the ATS to a BMW 3 Series, an Audi A3, or Mercedes-Benz CLA-Class, it's really not much different. Below are the pricing points:

*BMW reports 3 Series and 4 Series under one statistic. Source: Edmunds.com

Perhaps, Cadillac's German-built competitors are dominating the low-end luxury car market. With all similar pricing points, U.S. consumers may opt for what has historically been considered by many as more "supreme" luxury rides.

More specifically, the Mercedes-Benz CLA-Class may be stealing market share from the Cadillac ATS. The new sports car is clearly aimed at younger buyers, and they may opt to sport a Mercedes-Benz over a Cadillac, especially at the lower pricing point. 

Since the CLA-Class went on sale in September 2013, ATS sales have slumped, on average, 9.33% each month. Below shows monthly sales figures for the ATS: 

Source: GoodCarBadCar.net

Source: GoodCarBadCar.net

Cadillac's shining star
The Cadillac SRX is the only model showing significant sales growth in 2014, up 19.1%. This is slightly surprising, given that its total sales actually decreased 1.2% in 2013. But demand remains for the crossover, which is the only shining star for Cadillac thus far in 2014. 

One final theory
I do have one final thesis as to why Cadillac sales are declining. The luxury brand is generally driven by people who make good money. Usually people who make good money are affluent individuals, and have likely seen the not-so-hot headlines about General Motors. 

Sales did take a hit in January -- before all of the recall news broke -- but the weather was horrendous. All the automakers felt the pinch that month. Cadillac experienced a small sales dip in February, before reporting a 6% sales drop in March and recovering slightly in April, up 5.1%.

At this point it's too early to say. But sales for Cadillac, and General Motors in general, could took a hit due to the negative publicity the automaker has had in the past several months. In any regard, the sour news won't help sales going forward. 

The bottom line
A combination of price hikes, competition and cannibalization are all likely thwarting sales of Cadillac. Since we're only through the first four months of 2014, a lot can change going forward -- for better or for worse. 

For those savvy investors looking for Cadillac to churn out more sales gains this year, keep an eye on the brand's total sales, and its competitions' sales to see if it's a Cadillac-specific issue or a luxury auto market issue. So far, and unfortunately, it seems to be the former.