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Why the 2017 Cadillac XT5 SUV Is Huge for General Motors

By John Rosevear - Feb 13, 2016 at 11:40AM

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Luxury crossovers are white-hot. Cadillac's XT5 is the first of several all-new Cadillac crossovers that will seek to boost GM's share of this highly profitable market.

The 2017 Cadillac XT5 crossover SUV will arrive at U.S. dealers this spring. Image source: General Motors.

What's happening: General Motors (GM -0.20%) said this week that its new 2017 Cadillac XT5 crossover SUV will have a starting price of $38,995 when it goes on sale in the U.S. in April. 

Why that's significant: At $38,995, the XT5 is about $1,400 more expensive than the model it replaces, but it will still have a starting price below all of its key rivals'. Volkswagen's (VWAGY -1.24%) Audi Q5 starts at just under $42,000, and even the cheapest versions similarly sized entries from BMW (X5) and Mercedes-Benz (GLE-Class) start at well over $50,000.

That said, the top-of-the-line Platinum version of the XT5, which starts at $63,495, is more expensive than the highest-trim version of Audi's Q5 and close to the price of the top Mercedes-Benz GLE variant. 

But the XT5 should find plenty of interested customers. It's an all-new midsize luxury crossover SUV that succeeds the Cadillac SRX. The SRX is an aging design that is in some ways outclassed by newer rivals, but it has been a surprisingly strong seller for Cadillac in both the U.S. and China. Despite its lame-duck status, global sales of the SRX were up 13.3% last year. That success hints at the potential for the new XT5. 

The XT5 is 278 pounds lighter than the SRX, and it's said to have much-improved driving dynamics. Its interior, in keeping with other recent Cadillac models, is also significantly upgraded, rivaling (or beating) the class leaders'. 

The new XT5's interior is upgraded significantly from the SRX's. Image source: General Motors.

Under the hood, the XT5 features Cadillac's new 3.6-liter V6 engine. It makes 310 horsepower, more than the outgoing SRX's V6. And with stop/start technology and a new GM eight-speed automatic transmission, the XT5 is expected to get better fuel economy than its predecessor as well.

What it means for GM: Other recent Cadillacs, including the CTS and CT6 sedans, have deeply impressed critics. The XT5 has a lot of promise: On paper, it looks similarly impressive. And it should give Cadillac a much-needed boost in the fastest-growing part of the global luxury-car market. 

Cadillac's sedans are great products, but SUVs are where the growth is happening. The brand has several more crossovers in the works, but its sales are likely to be subdued until they arrive.

The XT5 is the first of a wave of new Cadillac crossover SUVs expected to arrive over the next few years. Image source: General Motors.

Its price is impressive, too, several thousand dollars below most rivals'. Cadillac president Johan de Nysschen knows that he can't yet match the pricing of Cadillac's German rivals because the Cadillac brand still lacks the cachet of BMW and Mercedes-Benz. That's a lesson that Cadillac learned the hard way: It priced the CTS in line with German rivals, only to see sales slump as Cadillac's traditional buyers found themselves priced out of the new model. 

De Nysschen is determined to change that with strong products and carefully calibrated marketing. It's a process that will take years. In the meantime, he says Cadillac will build its reputation by offering great products at better prices than its rivals.

But given current global trends, it should be hard for Cadillac to miss with a well-executed midsize luxury crossover at a good price. We'll see.

John Rosevear owns shares of General Motors. The Motley Fool recommends General Motors and BMW. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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