When it arrived in 2012, the Cadillac ATS was hailed as a true BMW rival. So why are sales off 20% this year? Source: General Motors Co.

Until recently, sales at General Motors' (NYSE:GM) Cadillac brand were on a tear. U.S. sales of Cadillacs rose 21.9% in 2013, thanks to new models like the XTS and ATS sedans. 

But so far, 2014 has been a very different story. Through May, Cadillac sales are down 2.3% from year-ago levels. And its those same two models that seem to be the culprits: ATS and XTS sales are both sharply lower so far this year.

What's the deal? Is the long-awaited Cadillac revival turning out to be a dud?

Cadillac says they aren't worried, but...
When you look at the monthly sales charts, it's clear to see where Cadillac's troubles lie: Sales of the big XTS sedan are down 21% through May, and the much-acclaimed compact ATS is down 20%.

The midsize CTS models and the SRX crossover are both up, but not enough to make up the difference. Meanwhile, the big Escalade SUV just had a changeover to an all-new model, so inventories were thin for a while, and the ELR hybrid has only racked up token sales (fewer than 300 through May). 

The new midsize Cadillac CTS sedan is selling well, but its smaller and larger siblings have stalled. Source: General Motors Co.

That's the whole Cadillac lineup. And while GM has to be encouraged by the reception that the all-new (and hugely improved) CTS sedan and Escalade SUV are getting (up 39% and 30%, respectively, in May), the big drops for the ATS and XTS have to be worrisome.

GM says it's not worried. Cadillac spokesperson David Caldwell told me that there's lots to be encouraged by. For starters, Cadillac is backing off of fleet sales, in favor of more profitable retail sales. Through April, he said, Cadillac's fleet sales were down 40% -- and fleet sales of the ATS were down 95%.

Caldwell also told me that some of the slippage we've seen with the XTS and ATS is simply a matter of shifting customer preferences. Luxury sedans in general have been relatively weak next to SUVs and crossovers. The nearly 21% gain for Cadillac's SRX through May -- which, Caldwell notes, is an older model nearing the end of its life cycle -- is evidence of that.

True enough. And it's also true that the new CTS sedan is doing very well for Cadillac, and that's probably taking some sales from the other sedans. And at least as far as retail goes, the brand isn't doing badly: April's results were Cadillac's best April in retail since 2007, Caldwell noted.

But is there something else going on?

The ATS may be last year's news
I decided to get a more objective view. Edmunds.com's Senior Analyst Jessica Caldwell (no relation to Cadillac's David) dug into her numbers and offered up a different perspective.

As she sees it, the ATS's sales lag is just part of Cadillac's growing pains. GM is mounting a long-term effort to rebuild Cadillac as a global rival to the big German luxury-car brands, and while the products are very close to parity with BMW (OTC:BAMXF) and the others, Cadillac's image is still lagging.

Caldwell says that luxury buyers "want the latest thing", and notes that BMW's latest 3-Series is newer and fresher than the ATS, which was introduced in 2012 and is arguably last year's "latest thing". 

She also notes that BMW buyers don't really "cross-shop" the ATS, meaning that when they research alternatives, the ATS isn't generally on their list. 

According to Edmunds' data, while ATS buyers cross-shop the CTS, the 3-Series, Audi's A4 and Infinit's Q50, it doesn't really go the other way. With the exception of Q50 buyers, those who cross-shopped the ATS were generally looking at other American brands, Buicks and Lincolns.

The ATS's lease rate is in the same range as its German rivals, over 50%, she said -- an indication that it is at least drawing the same kinds of buyers to some extent.

Edmunds' data suggests that Cadillac XTS buyers tend to cross-shop Lincolns and Buicks, not BMWs. Source: General Motors Co.

But the XTS isn't: Its lease rate is under 30%, she said, and the percentage of cash buyers is very high -- something that generally indicates older customers, she said. Her sense that the XTS is mostly drawing old-school Cadillac brand loyalists.

Edmunds' data seems to support that. It suggests that the XTS is mostly cross-shopped against other Cadillacs, as well as the XTS's corporate siblings (the Buick Lacrosse and Chevy Impala), the Lincoln MKS, Hyundai's (OTC:HYMTF) Genesis -- and to a limited extent, Mercedes-Benz's E-Class.

So is the Cadillac revival failing?
Edmunds' Caldwell says that it can take a long time to change buyers' perceptions of a brand, especially in the luxury space. It may take another generation or two of ATSs before it's really seen as a peer to the 3-Series by BMW loyalists, for instance.

She thinks that the ATS has "had a fairly decent start," though. And I agree: The strong early reviews gave it some credibility right way. And the new ATS Coupe that is set to join Cadillac's lineup later this year might give it a boost.

The new 2015 Cadillac ATS Coupe could help boost ATS sales a bit. Source: General Motors Co.

But I think the lesson here is that building a luxury brand takes a lot of time and effort. For years,  Cadillac's products were clearly inferior to the best from Germany. To its immense credit, GM has largely closed that gap. (In fact, with the new CTS, GM might be a little ahead of the Germans.) 

But that's just the first part of the battle. As hard as that was, the next task might be even harder: Elevating the brand to the Germans' level. Can GM do it? It may be years before we know.