General Motors Co. (NYSE: GM) has priced the new Cadillac ELR electric luxury car far too high for it to sell well. The primary reason is not that it has a sticker above that of the wildly well-regarded flagship of Tesla Motors Inc. (NASDAQ: TSLA), with which it will compete. Cadillac does not have enough of a quality brand image to justify the ELR price.
This is Cadillac’s calculation of the ELR’s sticker:
Designed for a new generation of technology-driven luxury buyers, the 2014 ELR has a starting price of $75,995, including a $995 destination charge but excluding tax, title, license and dealer fees. Upon IRS certification of an anticipated federal tax credit, purchasers may be eligible for a tax credit from $0 to $7,500 depending on individual tax liability. Net pricing after tax credits could be as low as $68,495, including $995 destination.
In the new J.D. Power 2013 U.S. Initial Quality Study, Cadillac ranked well down the list, behind, among others, Porsche, Lexus, Infiniti, Mercedes and Audi. The challenge of creating a premium image for a non-premium brand makes the ability to get a high price almost impossible, at least in any volume. And by the other J.D. Power measurement, the 2013 U.S. Vehicle Dependability Study, it does even worse, falling behind budget brands Suzuki and Mazda.
Another nationally regarded measurement of auto product quality is the American Customer Satisfaction Index. While Cadillac does slightly better than the industry average, it still falls behind Mercedes, Lexus and even Subaru. And the Cadillac rating fell from 2012 to 2013.
It is impossible to imagine what series of decisions Cadillac management made to price the ELR at a level that will make its success nearly as impossible. However, Cadillac executives have made poor decisions for decades, which is why it has fallen so hopelessly behind foreign competition, and more recently has to contest with Tesla as well.
In the announcement of the ELR release, Bob Ferguson, senior vice president Global Cadillac said:
The ELR is a unique blend of dramatic design with electric vehicle technology capable of total range in excess of 300 miles. ELR is also unique in that it will be offered nationwide within a luxury customer experience, with proven benefits and care extending from the shopping process all the way through the ownership experience.
Consumers are not impressed with the Cadillac “ownership experience” now. The ELR will not change that.