U.S. Luxury Brands Swim Against Tide in California

When Judd Weiss was offered a $100 Amazon gift certificate to test-drive a Cadillac, the 33-year old commercial-real-estate investor, who currently leases an Infiniti, figured, why not?

After trying out the XTS, Weiss, who lives in Santa Monica, CA, says the model is a bit too large for his tastes. “I probably should have driven the ATS,” he says. “But the XTS drove well. Cadillac is not a big boat anymore.”

That is music to General Motors executives’ ears. In California’s import-heavy market, domestic luxury brands have struggled to gain a foothold. Now, new models and inventive marketing are giving Cadillac some traction with the state’s picky drivers.

Lincoln is still trying to find its footing. But it will be some time before any domestic nameplate becomes synonymous with luxury in California.

“Cadillac and Lincoln can succeed in the Southern California market, but it is not going to happen overnight and (not) unless they have some really exciting product,” says Karl Brauer, senior director-insights at Kelley Blue Book.

Cadillac is hitting home runs with new models such as the ATS, which he says rivals the BMW 3-Series on many levels.  Brauer lauds the CTS for its luxurious interior and “very cool” wraparound light-emitting-diode headlamps.

The models have a distinctive Cadillac feel, the analyst says:  “The CTS does not feel like a Chevy, and the ATS doesn’t feel like a modified Impala platform.”

Nonetheless, Cadillac has a ways to go, admits Melody Lee, director-brand and reputation strategy for the GM brand.

“When people in California are shopping for a luxury vehicle, they aren’t even putting Cadillac on their list,” she says.  “It is indicative of a problem we have all over the country.”

The nameplate’s decline started with bad product, Lee says. Now that Cadillac is earning praise, her task is to get consumers to consider buying one. In California, that means extra emphasis on experiential marketing.

For example, the brand held a “Girls in Tech” event a few weeks ago in Northern California’s Silicon Valley to celebrate women’s accomplishments in technology and innovation. Pam Fletcher, GM’s executive chief engineer for the upcoming ELR electrified coupe, was the speaker.

“It is a little bit harder to penetrate here with your normal TV ad,” Lee says. “It is important to get California consumers where they are already living their lives.”

California is an especially tough market for the domestics because import luxury brands are dominant.

Cadillac accounted for only 0.8% of new registrations in the state through June, up from 0.68% at the end of 2012, according to R.L. Polk. Lincoln’s share for the year’s first half was 0.26%, down from 0.31%.

“Lincoln in California is a brand with very little recognition,” says Ed Kim, vice president-industry analysis at market researcher AutoPacific in Tustin, CA.  “It is not even perceived as a pure luxury brand by most Californians.”

Though Lincoln has announced it will launch four new products between 2012 and 2016 as part of the brand’s reinvention, most will be front-wheel drive when true luxury demands rear-wheel drive, Kim says, adding the brand lacks a luxury aura.

“The (Lincoln) cars still look like Ford models,” he says.

Lincoln still is associated with storied nameplates such as the Town Car, and must increase its appeal to younger customers, says Henry Ford, Lincoln area manager-West Market area.

“We are trying to create a brand of quality, design and personal luxury, where customers really get an experience that is tailored to every single one of their needs,” he says.

As with Cadillac, experiential marketing is key to Lincoln’s efforts in California.

Ron Davis, owner of Santa Monica Lincoln, says the “Driven to Dine” program has been a big hit in the Los Angeles area. Lincoln invites clientele of high-end restaurants to dinner, offers a test drive as an “appetizer” and picks up the tab.

In before-and-after surveys, favorable opinions of Lincoln nearly double, from 44% to 87%, Ford says.

“The dinners have worked well,” Davis notes, “but it will take a lot of time to generate the kind of sales they want.”

California drivers tend to be environmentally conscious, and one Lincoln model, the MKZ hybrid, accounts for 60% of the brand’s sales in the state.  Lincoln offers it for the same price as the internal-combustion-engine-powered MKZ.

“The hybrid powertrain has met the needs of those customers who are looking for an alternative powertrain,” Ford says.

Offering the hybrid at no price premium is a nice touch, Kelley Blue Book’s Brauer notes. But the MKZ doesn’t make the compelling visual impact or statement that is important to buyers of alternative-powertrain vehicles.

The Cadillac ELR, an extended-range electric vehicle due in showrooms in January, does. Even though it shares the Chevrolet Volt’s powertrain, “no one is even going to think Volt” when they look at the ELR, says Brauer.

“Take a car that looks as good as that looks, and package an alternative powertrain, and you have a car that can sell in a jaded market like California.”

People already are asking about the ELR, says Jeff Parr, a sales and leasing consultant at Martin Cadillac in Santa Monica. “It will change the brand image,” he predicts.