GM rolls out U.S. discount on Escalade
In Cadillac and Lincoln showrooms across the U.S., the battle of the behemoths is on.
General Motors is stepping up its defense of the Escalade SUV, a cash cow for Cadillac and the company, by offering $10,000 US discounts to some current customers to keep them from straying to Ford’s hot-selling new Lincoln Navigator.
The deal for American customers applies to leasees of all 2016 model Escalades, and owners are being offered a $7,500 discount. The promotion runs through May 31, according to a memo GM sent dealers. Jim Cain, a GM spokesman, confirmed its authenticity, calling it “an exclusive private offer” designed to “keep people in the family.”
GM has ample reason to keep Escalade buyers coming back. The big sport utility vehicle generates outsize profit from relatively modest sales: Morgan Stanley analyst Adam Jonas has estimated it produces about $1 billion in annual profit, contributing to a $2 billion earnings advantage GM has across all its large SUVs over Ford.
“GM is trying to keep Escalade buyers out of Navigators, for sure,” Jeff Schuster, an analyst at LMC Automotive, said by phone. “You’ve got a fresh Navigator and you’ve got an Escalade that is not new and is starting to age.”
While the Escalade outsells the Navigator, Lincoln’s contender is quickly gaining ground. Navigator deliveries have risen 63 per cent this year. The high-end Black Label Navigators – which can top $100,000 – spent only about seven days in showrooms, according to the company.
The average price paid in March for Navigators ballooned by about $25,600 from a year earlier to $82,500, roughly on par with the Escalade, Mark LaNeve, Ford’s U.S. sales chief, said during an April 3 monthly sales conference call.
The segment’s hefty prices give GM more room to maneuver when it comes to incentives. Analysts estimate that profit per vehicle can top $20,000 on the Escalade.
“GM is willing to forgo a little profit to keep loyalty within the brand, but they’re still making money,” Schuster said. “The new Navigator has sent a signal to Cadillac that they need to be in front of this and be aggressive.”
This is at least the second significant deal GM has dangled to blunt the impact from the new Navigator. In November, GM offered Lincoln owners a $5,000 incentive to trade in any model since 1999 for a new Escalade.
The moves seem to be working: Escalade sales are up this year, and average transaction prices have risen slightly, according to Cain, the GM spokesman. Big luxury SUVs that are seeing deliveries declines through March include the Mercedes-Benz GLS, Land Rover Range Rover and Lexus LX.