ATS, Cadillac's 3-series fighter, hits pricing hurdle

DETROIT -- When General Motors launched the Cadillac ATS nearly a year ago, executives sent a bold message by pricing the newcomer in the same territory as BMW's 3 series, long the compact-luxury segment's top seller.

But at the dealership, the ATS hasn't commanded 3-series prices, research data show. Through the first six months of the year, the average transaction price on the ATS was $39,459, vs. $44,764 for the 3 series, according to Edmunds.com. The ATS had heavier incentives, too: $4,088 per unit, vs. $3,555 for the 3 series.

The pricing gap underscores the challenge facing Cadillac as it tries to compete head to head with BMW and other German luxury rivals, which have greater scale to invest in broader lineups that command higher prices.

For example, in addition to the 328 sedan, BMW's 3-series lineup includes pricier variants, such as a coupe, convertible and the M3 performance model. The ATS lineup consists of only the sedan, although a coupe and a high-performance V-series model are expected next year.

The gap also points to BMW's edge in brand cachet despite critical praise for the ATS, says Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book.

"It shows what German engineering and the strength of the BMW brand is buying them," Gutierrez says.

The launch of the ATS as a new nameplate in September was GM's attempt to establish a foothold in the compact segment, the largest category by volume in the luxury market. GM has been explicit about its goal of poaching BMW customers, even citing the 3 series by name in some Cadillac advertising.

Cadillac spokesman David Caldwell says the ATS is achieving the goal of bringing new, younger consumers to Cadillac. He says 74 percent of ATS buyers are new to the brand and 20 percent of buyers are under age 35.

ATS pricing is more competitive with other top luxury compacts. Through June, the sedan was within about $1,000 of Mercedes-Benz's C-class sedan, and it topped the Audi A4's average transaction price by about $2,000.

The pace of ATS sales -- Cadillac sold 22,088 units this year through July -- has been on target with analysts' estimates.

Mike Ettleson, dealer principal at Ettleson Cadillac-Buick-GMC in suburban Chicago, says the ATS has drawn younger buyers to his showroom. Customers have traded in Acura, Mercedes and Lexus vehicles and a few BMWs.

But while the ATS is "comparable in size and price and handling" to the BMW, Ettleson says, "I think you've got to give that buyer something extra to get them to make that jump."