General Motors Company (GM), Ford Motor Company (F): Why Fast Cars Are Big Business

Page 1 of 2

Cars like the Cadillac CTS-V are much more important to their makers than their tiny sales numbers would indicate.

Photo credit: General Motors Company (NYSE:GM)

Ever wonder why so many automakers build fast, expensive cars?

Here’s a clue, starting with the latest news from Germany’s Audi brand.

Answering the prayers of a tiny band of well-heeled car nerds around the world, Volkswagen (NASDAQOTH:VLKAY)‘s Audi brand said that it will speed up future launches of its hyper-fast (and hyper-expensive) RS lineup of high-performance cars.

Audi sales chief Luca de Meo told reporters at the Shanghai Auto Show on Saturday that the move to bring future RS models to market sooner would help it boost profits.

That’s a big priority for Audi, as the already very profitable brand works to close a pricing gap between it and German rivals BMW and Mercedes-Benz.

But does it matter to the rest of us? Audi’s RS models can cost $100,000 or more, and they sell in tiny numbers. Who cares, beyond those few rich car nerds and a few German auto executives?

I bet General Motors Company (NYSE:GM) cares, for starters. Here’s why.

General Motors CompanyFast cars have fat profit margins
Audi’s RS models don’t sell in big numbers. In the grand scheme of things, neither do their German counterparts, Mercedes’ AMG models and BMW’s somewhat more famous M line of vehicles.

But they’re important to the businesses in other ways. In fact, high-performance “halo” cars are so important to luxury brands that General Motors Company (NYSE:GM) pushed to get the second-generation of its hot Cadillac CTS-V sedan to market in late 2008 – when it was quickly spiraling down the drain toward bankruptcy.

Why did General Motors Company (NYSE:GM) do that at a moment when it was desperate to conserve cash? There are two big reasons. First, these cars are very profitable: The current Cadillac CTS sedan starts at about $39,000, and a nicely equipped one will run you about $50,000 or so – but the CTS-V can run well over $70,000. That difference is mostly profit.

The CTS and CTS-V are the same basic car, built on the same assembly line in Lansing, Mich. – but the bigger engine and other high-performance features in the V version command a substantial premium in the marketplace, much greater than General Motors Company (NYSE:GM)’s incremental cost to build it.

That’s even more true at Audi, where the RS versions of its sedans can sell for as much as three times the price of the base model.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!