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How General Motors Is Playing the Luxury Car Market

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Dec. 4 2020, Updated 10:52 a.m. ET

Luxury car market

General Motors is not a big player in the attractive luxury car space, which is dominated by Mercedes-Benz, BMW, and Audi (VLKAY). According to General Motors, based on its own and third-party estimates, the luxury segment and the full-size truck segment account for ~60% of the automotive industry’s profits.

The profit contribution from these two segments is disproportionate to their 14% share in total automotive sales, as can be seen in the chart below.

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Cadillac brand

Although General Motors has several full-sized trucks in its portfolio, the same doesn’t hold true for the luxury segment. However, General Motors seems to realize the importance of the luxury car market and is working to strengthen the Cadillac brand—its only luxury offering. GM hopes to capture a 10% share of the luxury car space. Currently, the company holds a 3.4% share in the global luxury market.

According to Johan de Nysschen, president of Cadillac, “Cadillac will get back to the pinnacle of premium and once more be a global iconic American luxury brand.” However, the company has a long way to go to reach that goal.

What is GM doing?

According to GM, it has steeply reduced the dealer inventories of Cadillacs over the last couple of years. The company is targeting an average 60–65 days of supply of the Cadillac brand. The brand was plagued by massive oversupply in the past, which tends to hurt a brand’s perception. So, luxury carmakers tend to keep their inventories low.

Moreover, GM is strengthening its product portfolio to compete in the luxury car space. The company is expected to launch several brands to serve the luxury market, from entry level to the large SUV.

GM acknowledges that it is losing market share to Japanese brands like Toyota Motors (TM) and Honda Motors (HMC). Japanese (EWJ) carmakers have been able to lower their pricing in the entry-level luxury market on the back of the yen’s depreciation.

In the next part, we’ll explore what GM is doing to fend off competition from Uber and Apple.

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