GM’s electric Cadillac Escalade to test EV strategy, cash machine

NEW YORK – General Motors on Wednesday will reveal a new all-electric version of the Cadillac Escalade, testing the luxury SUV’s prestige for a new era of drivers and the company’s strategy to turn its most lucrative vehicles into money-making EVs.

GM CEO Mary Barra and other executives have promised Wall Street that the automaker’s new EVs will be profitable, targeting EV profits comparable to gas-powered models by mid-decade and annual EV revenue of $90 billion by 2030.

But slower-than-expected electric vehicle launches, inflated raw material costs and emerging concerns about consumer acceptance have some doubting the automaker’s ability to achieve the scale it needs to deliver on such targets.

The all-electric Escalade “IQ” will be an important proof point for reassuring investors.

The Escalade IQ is the first – and most important – traditional Cadillac model to be released as an EV. It’s set to eventually replace the current gas- and diesel-powered vehicles, unlike Cadillac’s Lyriq and Celestiq EVs that represented new entries for the brand.

“The Escalade is one of the lynchpin or capstone vehicles for GM. It is the sweet spot of their image and profitability,” said Tyson Jominy, J.D. Power vice president of data and analytics. “It certainly defines the Cadillac brand. Beyond that, it’s an extraordinarily profitable brand itself for General Motors.”

Cadillac plans to exclusively sell all-electric vehicles by 2030, making it GM’s luxury EV brand. Investors will be watching for how, or whether, the automaker can also transfer the Escalade’s lofty profit margins – estimated at upward of 30% – to the EV models.

Cadillac Vice President John Roth declined to discuss Escalade profit margins but said the vehicle “certainly carries its fair share of weight” for the brand. Current models start from about $81,000 to $150,000 for a limited-edition performance variant.

The EV version is expected to be priced toward the upper end of that range. GM declined to comment on pricing ahead of the vehicle’s reveal Wednesday in New York City.

“When you make your franchise player an EV, you send a statement to the world that in no uncertain terms, Cadillac is going all-electric,” Roth, who started his current position in June, told CNBC.

The Escalade SUVs, including a larger “ESV” model, are among the most expensive vehicles bought by U.S. consumers.

Auto insights firm Edmunds reports the average transaction price for an Escalade was $115,500 through the first half of this year. That places it below the industry-leading Mercedes-Benz G-Class SUV at more than $202,000, but above nearly 300 other vehicles, excluding exotics such as Ferrari and Lamborghini.

Sales of Escalades have grown in importance to the brand, representing upward of 30% of Cadillac’s U.S. sales in recent years. GM says it has sold more than 1 million Escalades globally since the vehicle was introduced in 1998, a vast majority of which have been sold in the U.S.

“The introduction of Escalade gave Cadillac a flagship. Realistically, over the years, Escalade has become an icon,” Michael Simcoe, GM’s global design chief, told CNBC. “It’s earned and deserves its position as a true luxury vehicle and the top of the Cadillac range now.”

GM has called the Escalade IQ, which is expected to share little to nothing with the traditional models, the “reinvention of an icon,” rather than a replacement, for now.

The automaker plans to initially sell the new electric Escalade IQ alongside the current traditional models.

Rory Harvey, who previously led Cadillac before becoming head of GM North America in June, described the strategy as “a stunning proposition in terms of having the two variants” that will allow the company to better juggle production with demand.

The electric Escalade will be produced at a factory in Detroit alongside EV versions of the GMC Hummer, Chevrolet Silverado and Cruise Origin shuttle. The vehicles all share GM’s new “Ultium” vehicle platform, batteries, motors and other components.

The traditional Escalade will continue to be produced at GM’s Arlington Assembly in Texas along with full-size SUVs from Chevrolet and GMC that share a vehicle platform and other components with the Escalade.

A teaser video released by GM of the Escalade IQ appears to have more design elements similar to the automaker’s Cadillac Lyriq and Cadillac Celestiq than the traditional Escalade. The vehicle features an illuminated grille, vertical headlights and a potentially smoother exterior.

Simcoe, who has been with GM for roughly 40 years, said the goal of the IQ was to build upon the Escalade’s reputation without encroaching on the current models with internal combustion engines (ICE).

“The intention is to not take anything away from the ICE Escalade … and that’s one of the challenges. How do you do a vehicle as good as that and then up your game,” he told CNBC.

But the Escalade carries more significance to GM than just profits.

The vehicle has grown into a status symbol, highlighted in hundreds of songs, TV shows and movies for the rich, stylish and powerful.

Such appearances assisted the early adoption of the vehicle, according to Wayne Cherry, a former GM design chief who oversaw the first-generation Escalade. That led GM to increasingly differentiate the Escalade from its GMC and Chevrolet sibling SUVs despite largely sharing the same mechanical components.

“I think the design evolution has been excellent. It continues to look distinctive and recognizable and has evolved extremely well with the advances in technology,” Cherry said in an email.

GM regularly uses the Escalade to debut new technologies and design characteristics that then trickle down to the rest of the Cadillac brand or other vehicles in GM’s lineup.

Ivan Drury, senior manager of insights at Edmunds, believes the Escalade IQ could continue such trends for a new generation of Cadillac buyers, without the gas-guzzling stigma.

“The vehicle exudes excess. It’s meant to say, ‘I don’t care about the following things including being eco-conscious or -friendly,'” Drury said. “But the thing about IQ is you could potentially get all of those new eyeballs … It’s something that really does bring new blood to the brand.”