U.S. companies will unveil luxury vehicles at New York Auto Show that take aim at Chinese buyers
March 30, 2015 12:09 a.m. ET
DETROIT—The American premium sedan is going on a road trip. Destination? China.
The two biggest U.S. auto makers will unveil new passenger cars at the New York International Auto Show later this week. While earmarked for sale in the U.S. and other markets, the sedans take specific aim at the growing collection of Chinese buyers snapping up Audi A8s, BMW 7-Series and Mercedes-Benz S-class.
General Motors Co.’s Cadillac brand is taking the wraps off the CT6, likely the brand’s most advanced product in its 113-year-old history. With a body made with about a dozen materials, including aluminum, the vehicle hits dealerships late this year with a goal of raising the profile of a brand often lauded for its cars but criticized for its marketing.
Ford Motor Co., meanwhile, is reviving its Continental name, attaching it to a posh new sedan to be launched in 2016. Ford Chief Executive Mark Fields said in an interview that the new “flagship” represents a bold and costly step for a brand striving to get on its feet. Pulling a name from the Lincoln brand’s glory days should demonstrate the brand has a “history with a future,” Mr. Fields said.
Though their luxury strategies have diverged in recent decades, GM and Ford both have committed billions to sprucing up their luxury brands because the growing luxury business—representing about 10% of the world’s auto sales—delivers half of industry profit. The bulk of Detroit’s investments will be made with an eye on growing in the world’s largest market—China, and this means they will develop cars that peg design, engineering and performance above profit margins.
“China is a big part of the picture for all of us,” Cadillac Chief Johan de Nysschen said in an interview Friday.
Mr. Fields said China will probably be Lincoln’s biggest market by 2020, a date by which he hopes to sell 300,000 Lincolns annually throughout the world, tripling today’s volumes. Lincoln officials declined to provide sales numbers because they are just getting started in the Chinese market.
Cadillac sold 73,000 cars in China last year. To gain a foothold in China, Cadillac has used its large XTS sedan, which represented 45% of Cadillac’s 2014 sales in the country. Mr. de Nysschen said more luxurious and capable offerings are needed if the brand is to be taken seriously.
Cadillac and Lincoln were once the envy of the global premium-car business, but fell behind after years of underinvestment and internal competition with other brands. After shedding many brands and restoring corporate finances, GM and Ford executives say returning the two luxury marques to prominence is a top priority.
The Continental and CT6 are built off entirely new platforms, or vehicle architectures. Often costing in excess of $1 billion to develop, these platforms serve as the base DNA of several cars and sport-utility vehicles. In this case, Ford and GM’s new platforms will underpin a sprawling family of large vehicles.
But they are miles behind in China, and the new platforms come several years after Daimler AG, BMW AG and Audi AG built positions there. Mr. de Nysschen, in fact, said Audi has a 20-year head start.
Germans are the dominant players in the market, selling a combined 1.8 million vehicles in China last year and snatching a 72% market share, according to IHS Automotive. The heart of the Chinese luxury market is the big car—highly profitable sedans where owners prefer being chauffeured rather than sitting behind the wheel—and Germany owns this market.
BMW has sold 48,000 7-Series large sedans over the past two years in China, more than doubling its U.S. 7-Series sales. Mercedes sold 53,500 S-class sedans over that period, 42% more than it delivered to American buyers.
‘I can’t afford to build one set of cars for the U.S. market and another set of cars for the Chinese market.’
—Cadillac Chief Johan de Nysschen
For decades, many auto makers have tried to compete in the Chinese market by offering a longer version of a sedan that is sold elsewhere in the world. Because capital is limited, Mr. de Nysschen said auto makers need to build one flagship for all markets, and that means back seats will be bigger and features will appeal to Chinese tastes.
“I can’t afford to build one set of cars for the U.S. market and another set of cars for the Chinese market,” Mr. de Nysschen said.
Mr. Fields agrees. When giving a sneak peek of the Continental before the New York Auto Show, a Ford designer often referred to both American and Chinese buyers.
Mr. de Nysschen, who in his previous job launched Nissan MotorCo.’s Infiniti brand in China, knows it will take more than designing great cars to win. “Our [GM] engineers have a 10-year head start over the marketers,” he said. In other words, the advertising—not the vehicles—is the problem.
Lincoln President Kumar Galhotra said the Continental is part of a bigger “quiet luxury” experience that Ford is trying to develop. Ford believes many potential customers will relate with the Continental’s role in U.S. history, often serving as the presidential limousine.
Mr. Fields said the Continental has been under development for about two years. It isn’t a car that the company would have created when it was losing billions of dollars and struggling to stay afloat. Over a recent lunch, Ford’s CEO said there were more economical ways to develop a car, but those methods wouldn’t stretch Lincoln and would stop short of the “repositioning” he seeks to pull off.
“Maybe the financials aren’t as attractive but this will really move the brand forward in making an investment in where we want to take the brand over time,” he said.
—The Upshot is a business column by Journal bureau chiefs. John D. Stoll is the Detroit chief and runs global auto coverage.