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Cadillac plans price hike in the name of exclusivity

The world of luxury goods is indeed a very strange one. This strangeness revolves around the idea that there is such a thing as too cheap. This isn’t because an inexpensive product might be poorly made, but because a low price can make an otherwise appealing product less appealing. This is the unfortunate position Cadillac now believe itself to be in. According to a report in AutoNews, as the brand’s image continues to improve in the areas of reliability and driving dynamics, there is now a worry that the wreath and crest still don’t carry the same prestige as the big German competitors.

The Cadillac CTS has a price about $8,000 lower than the competing BMW 5-Series, but if you tried to explain why to someone who had never heard of either brand (unlikely though that might be), you probably couldn’t do it. But that hasn’t slowed BMW’s sales one bit, and it’s clear that there is a market for cars which are more expensive just for the sake of being more expensive. Cadillac is therefore planning to bump up the price of the CTS following its upcoming redesign for the 2014 model year, thus narrowing the gap between it and its Germans rivals. 

The price is expected to still be below that of the BMW, but Cadillac’s aim is to narrow the gap. The price difference between their new ATS compact sedan and the competing BMW 3-Series is currently only about $3,400 and this will probably be about the gap which Cadillac will aim for with the new CTS. There is of course the risk of pricing the CTS beyond the prestige of the brand , and Cadillac is certainly in no a position to ask more for any of its cars than BMW does, at least not yet.

There is certainly a logic to all of this, but the CTS already sells well, and one can’t help but wonder if this is being done for all the wrong reasons. The market has, for several years now, been leaning more towards smaller and more fuel-efficient vehicles, and this is bad news for a company like GM, where the high profit margins from the SUV fad had kept them from needing to worry about their bottom line for so long. So is GM hoping to make up for a lack of SUV profits by pumping up the profit margin on their luxury division, or is this actually a good marketing move? We’ll see in 2014.