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Dealers mobilize to protect their margins from automaker subscription services

Six individual auto brands — Lincoln, Cadillac, Porsche, Mercedes, BMW and Volvo — have established or are trialing a vehicle subscription service in the U.S. Three third-party companies — Flexdrive, Clutch and Carma — run brand-agnostic subscription services. And three automakers — Mercedes-Benz, BMW, and General Motors — have also launched short-term rental services. Dealers, afraid of how these trends might affect their margins, are building political and lawmaking campaigns to protect their revenue streams. So far, three states are investigating automaker subscriptions, and Indiana has banned any such service until next year. It's certain that those three states are the first fronts in a long political and legal battle. Powerful dealer franchise laws mandate the existence of dealers and restrict how automakers are allowed to interact with customers to sell a vehicle. On top of that, Bob Reisner, CEO of Nassau Business Funding & Services, said, "Dealers and their associations are among the strongest political operators in many states. They as a group are difficult for state politicians to vote against." In California earlier this year, the state Assembly debated a bill with wide-ranging provisions to protect against what the California New Car Dealers Association called "inappropriate treatment of dealers by manufacturers." One of those provisions stipulated that subscription services need to go through dealers, but that item got stripped out when dealers and manufacturers agreed to discuss the matter further. In Indiana, Gov. Eric Holcomb signed a moratorium on all subscription programs by dealers or manufacturers until May 1, 2019, to give legislators more time to investigate. Dealers in New Jersey have taken their campaign to the state capitol, asking that the cars in subscription programs get a different classification for registration purposes. Automakers run the current subscription services and own the vehicles. Sign-ups and financial transactions happen online or through apps, leaving dealers to do little more than act as fulfillment centers to various degrees, with little legal recourse as to compensation amounts when they're called on to deliver or service a car. That's a bad base to build on for business owners who've sunk millions of dollars into their operations.

Cadillac's XT6 is not, for better or worse, a mini Escalade

In its latest attempt at reinvention, Cadillac has created a trio of admirable sedans — the ATS, CTS, and CT6 — cars that challenge or beat the competition on their own terms, and do so with audacious exterior styling rendered in a distinctly American idiom. But American customers have been ditching cars in favor of high-riding crossovers, and what Cadillac has not had up until recently is a suite of appropriately (or bizarrely) sized crossovers to offer potential consumers, something competitors have been deploying for years or even decades. And so the new, full-size(ish) three-row Cadillac XT6, unveiled officially last week at an event in Detroit, is intended to help address the premier domestic automotive luxury brand's current product shortcomings. "I guess we had so many priorities and had to decide what's the most important thing," says Andrew Smith, Cadillac's executive director of design. "We decided to approach this one from an interior perspective, to do things like provide ease of use for owners, upgrade the infotainment, and allow time for ourselves to learn lessons from the launch of XT4." The XT6 doesn't exactly break any new ground within the segment, but that's not necessarily a criticism. Though huge from a sales perspective, the two-box crossover category is not the industry's leader in beauty or innovation. Still, Caddy's most recent previous crossover, the size-Small XT4, managed to create handsome proportions and a premium appearance at first glance. The XT6 doesn't feel quite so ambitious or coherent, with a front end that is at once sneering and soft, a lengthy flank that feints at muscularity without delivering, and a rather abrupt tailgate that blends the rectilinear and the anodyne. Maybe consumers won't notice? "Our biggest challenge was giving the vehicle a character that works on this scale and platform," says Smith. "We want to make sure all of our cars feel different. We didn't want it to be a mini Escalade. No one wants a mini anything. But we wanted to give it Escalade presence, but in scale. So it's this combination of nice, and aggressive. I'm convinced we will sell more than we think we'll sell." Maybe he's right, and we definitely don't see this vehicle cannibalizing sales of the Escalade. People who want a bold Cadillac can still get that one, and will have a brand new option later this year, we expect, when a new Escalade is released.

Is Lincoln MKC cutting into Cadillac SRX sales?

The two big American luxury brands of Cadillac and Lincoln are on surprisingly similar paths at the moment with both divisions hoping to redefine themselves and grow popularity. They're still early in the process with no clear winner yet, but things might actually be looking up for Lincoln's latest model, according to a monthly sales analysis from The Motley Fool. It seems, at least early on, that the new MKC crossover might be taking a bite out of the Cadillac SRX's growth.
The MKC launched just a few months ago and has been getting a big marketing push from a series of oft-mocked ads starring the smooth-talking Matthew McConaughey. The luxury CUV has been the popular, new kid on the block with growing sales since its introduction. While smaller than the SRX, the Lincoln starts at a lower price and offers better fuel economy.
Through June, the SRX performed well with sales up over 20 percent on average through June, according to The Motley Fool. However, July and August saw things plummet with year-over-year drops of 7 percent and 37 percent, respectively. It still far outsold the MKC in terms of actual units in a given month, but the Caddy's continued growth has appeared to stagnate.