As Cadillac’s chief marketing officer, Uwe Ellinghaus has been charged with continuing to change perceptions about the iconic American luxury brand both here and abroad. Cadillac has been pushing its global presence and is partnering with nonautomotive brands such as New York fashion house Public School in an effort to broaden (i.e., lower the age range of) its customer base. We caught up with Ellinghaus, who’s spent the majority of his career with BMW, in Dubai during the reveal of the Cadillac XT5 crossover — the brand’s first-ever world debut outside of the U.S.
AM: What are some of the things that you’ve learned in the past two years about Cadillac customers, both new and established, and how best to market to them?
Ellinghaus: First, what I realized is how passionate Cadillac customers were and are about the brand. This brand is an iconic brand that has still so much appeal to people that … from outside of the U.S., you are sometimes surprised just how cool Cadillac is. But it’s also fair to say that we are in a situation where we embarked on a new direction for Cadillac, changed the position of the brand, and went to a territory that was traditionally not associated with Cadillac. Cars smaller than Cadillacs used to be, and also more driver- and performance-oriented. And I just understand why some people still cannot wrap their heads around just how much Cadillac has changed, might I say all for the better. It is understandable that we still need to give people time to find out how much Cadillac has changed and what we have to offer.
So I have to live with the fact that for a few more years, the products will probably be stronger than the brand. And that’s why my job is to close the gap and make sure that we deliver outside of the product in terms of the experience and the dealership. But as much as in communications to get across what Cadillac stands for, what is our point of view, what makes us different from the German competitors. Because just being nimble, quick, and fun to drive is good, but you can’t limit a car to that, right? So I want the distinctive design of the exterior and interior to play a prominent role because design is the No. 1 purchase reason for cars in any market and for any brand. But no other brand is so design-dependent in terms of the purchase reason as Cadillac is.
As Andrew Smith, our executive director for Cadillac Design, always says, there was a time when Cadillac was almost solely reliant upon the design to move the metal because the engineering substance underneath the design wasn’t there. But now we have lots of substance underneath — and a great design. Distinctive, not as bulky and messy as Cadillacs were, sleeker. Yet if I look at the Germans, still … [Cadillac is] a different kettle of fish and something that clearly is more of a statement than driving one of the three big German brands. And knowing that people want to seek individuality, I really think that this is a major trend shaker for us, and the ubiquity of the Germans will promptly be our second great opportunity that people say, “Yeah, they make lovely cars, but do I want a car that the entire neighborhood already has?” And if you look at the density of BMW, Mercedes, Audi in suburbia, it is verging at the ridiculous. Are any other cars allowed?
AM: So, the Public School thing here in Dubai. Definitely understand where you’re going, trying to get to a younger, hipper audience.
Ellinghaus: You saw the crowd last night.
AM: Yeah. Sure. Much younger.
Ellinghaus: We didn’t enforce physical violence on them. They all came voluntarily. We didn’t pay any, right? But you can tell what a difference it is from the expectation of most American visitors.
AM: And kind of part and parcel to that, the ATS is performing so well; do you feel like you are succeeding in marketing to younger folks? Is that kind of the core car for those people?
Ellinghaus: Yeah. It’s definitely the best conquest car for younger customers. We doubled the share of customers under 35 with the ATS, and this is because of its obtainable price but also because the driving characteristics are great. It’s like a go-kart on wheels, and that’s what younger customers like so much. And the CTS, as great as it is, is for some of them already too much a statement of maturity and another progression of your life and in your career, and therefore the ATS is the car.
But then, as you know, Generation X and Y will make 80 percent of all actual car buyers in the next five years, so all our cars have to attract younger audiences. … And the baby boomers who dominated luxury brands will not be a dying species. They will live long, but they will no longer dominate the numbers, and this means that a new generation for which connectivity, semi-autonomous driving, and utilization of drive time become far more important, and that’s why we need Super Cruise [tech that allows semi-autonomous driving].
I truly believe that the car is still relevant if we accept that it is not necessarily always fun to drive the car and allow the technology to take over. But what I insist upon is that we still make driver’s cars, even with semi-autonomous or autonomous driving, so it is you deciding whether you want to switch it on and off. Totally dependent on the traffic situation, right? And I think on the open road, our customers would still like it to be in control of the car and not [have] any system operating it.
AM: So, speaking of the CTS, it has obviously been challenged saleswise. Do you feel like it’s just in a transition phase?
Ellinghaus: It’s a fantastic car. We are not alone in our struggling. The competition is struggling with midsize lux as much as we are. So last year, for example, the midsize lux segment in the U.S. was down 9 percent; CTS was down 3 percent. So I can’t say it’s the car. Definitely not. The car is terrific.
The interesting phenomenon is the growth of SUVs the world over and the decline of sedans, particularly in the midsize category. All the competitors are asking the same questions that we do, and that is: Is this a temporary movement, or is it permanent? Are people moving away from sedans being the dominating concept in luxury? And I think it has something to do with the fact, which I mentioned last night, that for younger customers, luxury needs to be casual, and SUVs have a certain casual nature that a three-box sedan doesn’t have. It puts you more into the old business-world aspiration.
As great as the sedan is, it is the least practical of all cars. So I understand that people say, “Yeah, that’s right for business.” But right for business, right for family, and for my leisure ventures is an SUV. So, we need more SUVs going forward. And I still think the CTS needs to earn its way in, and it will get there. My hope that the segment will get back to the size that it once had is limited. And that’s why we need the XT5 so badly and a smaller SUV moving forward.
AM: Would it maybe have been better to get to another crossover before the CT6?
Ellinghaus: In light of the current SUV pool, yes. But when the CT6 was planned, if somebody else had said, “The oil price will half,” everybody would have said, “Where are you living?” So if people are telling me that they expected the economic development and the oil price development, I don’t buy it. I don’t buy it. Nobody had that on the agenda. And when the fuel price was twice of what is now, SUVs were struggling more. So this is the volatility of the luxury market and also the non-luxury market, and there’s nothing we can do rather than be flexible in our response.
But I do think that we needed the CT6 badly and finally great that I get it because Cadillac in its history was far closer associated with larger luxury cars, and I know of customers, and unfortunately former customers, who couldn’t get their heads around just how small ATS and CTS were and who either needed or wanted simply more space and a bigger car. I am convinced the CT6 will surprise positively as there are people out there who like the brand but walked away because we simply didn’t have a sedan that’s big enough. And if I have one point of criticism for ATS and CTS, it’s that the legroom in the rear is very limited.
AM: When you first came on board, you said that a car like the ELR was a priority for you. Is it still that way given where it’s at saleswise? And also, how important do you feel hybrid and alternative powertrain technology and Super Cruise and things like that … getting that kind of stuff across your lineup is important?
Ellinghaus: Put it this way: The ELR’s a big disappointment; there’s no denying, yet still I want it, and want it because it is a statement how progressive how Cadillac is and that we can tackle electromobility in the brand. But, it was also great learning exercise for all of us because maybe we asked too much. We tried to create a car that was the niche in the niche in the niche and that was where the volume ended.
So a coupe two-seat is already limited, right? Then, we spec’d it to the maximum degree and said we don’t want a rolling declaration of sacrifices, and I approved that as well and said, no, we don’t. We didn’t want to position it as a green car, right? So I like the luxury features, but it priced it into a level where people started comparing it to, dare I say it, the Tesla. And then they said it has the same price. Nonsense, because our car comes fully equipped and the Tesla is completely naked. But the Tesla is a four-door, right?
And that’s why my outtake is; we no longer go down this road that we have a certain car that has the electric credentials, the green credentials. Going forward, we’ll simply add plug-in hybrid-electric modes into almost all our cars. So the CT6, one year after it’s launched, will get a plug-in version, and future cars and SUVs will as well. I think this is the way forward for the entire industry. It will no longer be possible to emulate Tesla’s success. Tesla only is so successful because they have the belief in the electric engine being the sole engine on board. We were concerned in this industry about ranges, and the anxiety of getting stuck led us to add a combustion engine, and that caused the counter-reaction by some folks saying, “No, I am serious, I wanted a sole electric.” And I think that’s a minority. The majority, particularly not in urban areas, will need longer ranges, and for them, a plug-in hybrid is probably the best version.
But if all manufacturers offer it because the CAFE legislation, then why invest in this technology? It’s no longer a differentiating aspect to have. I think I said it this morning before Andrew [Smith] heard it, it will become the next all-wheel drive. Some will want it, and take the box and the price list, and others not. And that’s why I think it becomes an entry ticket into luxury automobiles rather than a differentiating aspect.
AM: Speaking of future propulsion, there’s a lot of talk about electric versus hydrogen fuel cells.
Ellinghaus: Hydrogen is infrastructure. I have some experiences there. I worked for BMW for 15 years. I say one thing: If you look at the environmental balance of electromobility as it is now, it makes no sense whatsoever. Nobody wants to hear it. But as long as the majority of the energy is generated from fossil fuels … and that’s about 80 percent right? U.S. … the environmental balance is negative. Nobody wants to hear it because for whatever reason, electric power was always clean, and nobody cared how it got into it, right? It’s still the case. So the Tesla, and electromobility per se, are not by definition good for the environment, on the contrary. I do believe that very long-term hydrogen is really the way … but I also realize that this industry needs to change its thinking in boxes, and in, let’s say, their own way forward because hydrogen failed. Even in Germany, where the government for a while was very excited about it, two leading manufacturers could simply not agree on the approach. And we see this with the fuel cell which requires hydrogen in a gaseous form, and we, at BMW at that time, insisted no, we wanted a regular combustion engine, and that means liquid. And then, the politicians had the perfect argument to say, “If you cannot even agree on a standard, we will not build infrastructure.” And I cannot even blame them.
AM: Obviously the XT5 is global reveal for you, and Cadillac as a brand has had global aspirations for a long time. How can you break through in Europe?
Ellinghaus: It’s time to get real. I think that ATS-V and CTS-V have surprised European automotive journalists much more than they even bear to admit, although they do admit that [coverage] from the recent press launches is absolutely terrific. And I really think this will help to show just how much Cadillac has changed. But I need to be realistic. I have no distribution in Europe as we speak, so we need to build a limited network. But, I don’t want to build traditional dealerships all over the Continent because I don’t think they are the future of automotive retailing. I once said in an interview that the future of automotive retail is not bricks and mortar. It didn’t go down where it was laid up. But I was serious because the future is digital probably. The future is probably [new-car] pickup and delivery service. … Nobody wants to go to a dealership for service and maintenance.
Of course we need a minimum presence there, and I think the absence of the diesel is not as much of an issue as it was eight weeks ago. It’s got some potential. Nowhere else are the Germans as strong as they are in Europe. Nowhere else is it as difficult to make money selling new cars. Nowhere else do people want smaller cars that we still do not have [at] Cadillac. And therefore, I must limit my own ambition and say for the next five years, we will remain in a niche role, but not a couple of hundred units only. But before we can really discuss 20, 30, 40 thousand cars in Europe, I’m afraid we still need diesel. Maybe even right-hand drive. And that’s the midterm scenario. But I really do think that a few thousand units a year in Europe must be our goal for now.