In Cadillac and Lincoln showrooms, the battle of the behemoths is on.
General Motors Co. is stepping up its defense of the Escalade SUV, a cash cow for Cadillac and the company, by offering $10,000 discounts to some current customers to keep them from straying to Ford Motor Co.’s hot-selling new Lincoln Navigator.
The nationwide deal applies to lessees 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 that was obtained by Bloomberg News. 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.”
Gaining Ground
While the Escalade outsells the Navigator, Lincoln’s contender is quickly gaining ground. Navigator deliveries have risen 63 percent this year. Last month, each one of the new SUVs lasted on dealer lots an average of just 10 days. The high-end Black Label Navigators -- which can top $100,000 -- spent only about seven days in showrooms, according to the company.
GM rolls out a $10,000 discount to defend its Escalade from Ford's hot new Lincoln Navigator https://t.co/nPqGhxUx53 pic.twitter.com/mObGXEn1up
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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.
Still Making Money
“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.”