There are many reasons people think that Costco Wholesale Corp. (NASDAQ: COST) is the best-run retailer in America. For example, it offers a $1.50 hot dog as a loss leader and has refused to raise its price. Costco has done the impossible. It makes billions of dollars by enticing people to shop in its stores.
Costco also gets deals from major car companies to offer customers (which it calls its “members”) large discounts. The program has some real benefit, as the average price of a new car in America is approaching $50,000.
Members can currently get deals on the Cadillac, Chevrolet, GMC, Polestar, and Volvo brands. Depending on the model, discounts range between $1,000 and $2,000. The members receive certificates that they take to dealers.
“Our goal is to deliver a great value and experience on the vehicles Costco members purchase year-round,” said Jay Maxwell, Costco Auto Program general manager. The new deals run until January 2.
Presumably, while the deal is good for Costco, it is at least as good for the car companies. Cadillac falls into this category specifically. It operates in one of the most competitive segments of the car market: luxury cars. And it does not do very well. It sits well behind Lexus, Mercedes, and BMW in unit sales. It has not gained any ground in market share for decades.
Cadillac has several disadvantages. For instance, it has a tiny model line. Cadillac’s competition sells dozens of models, from sedans to crossovers and SUVs. They offer gasoline-powered and electric models, as well as hybrids.
Cadillac is an SUV and crossover company that also sells a few sedans. The Costco deal gets at least a few people through the door. Mercedes, BMW, and Lexus already have that.
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