General Motors Corp. will test the market for a full-size luxury hybrid SUV when it releases the industry's first vehicle in that category — the Cadillac Escalade Hybrid — next month.
It's a market that could be hostile. U.S. sales of the non-hybrid Escalade have fallen 29 percent so far this year as consumers spooked by high gas prices and the shaky economy abandon larger vehicles.
Sales of GM's other hybrid sport utility vehicles, the Chevrolet Tahoe and GMC Yukon, also have been slower than GM had hoped for. Through July, hybrids have made up 4 percent of total Tahoe and Yukon sales, fewer than the 5 to 6 percent GM predicted when the vehicles went on sale early this year.
Another wrinkle is the leasing market, which has hit a rough patch as automakers are flooded with large trucks and SUVs that have lost significant value when they come off leases. GM has stopped offering incentives for leasing in Canada and has indicated that changes could be coming in the U.S. as well.
Expensive luxury vehicles are among the most likely to be leased, and Cadillac expects 50 to 60 percent of hybrid Escalades will be leased, so any tightening of leasing could affect sales.
Will green bling sell?
Still, GM has high hopes for the Escalade Hybrid, which is aimed at luxury buyers who may be less affected by the economic downturn and want to add a little green to the Escalade's bling. The vehicle, which features four prominent hybrid badges and large hybrid lettering on both sides, already has a waiting list of celebrities and politicians, according to Escalade global product manager David Schiavone.
The Escalade Hybrid gets 20 miles per gallon in the city and 21 on the highway, making it comparable to a midsize sedan with a six-cylinder engine but with the towing capacity of a large SUV. The gas mileage is a 50 percent improvement over the conventional Escalade in the city and a 10 percent improvement on the highway.
The Escalade's so-called two-mode hybrid system can operate in electric-only mode at speeds of up to 30 miles per hour, or with a combination of the gas engine and electric assistance at higher speeds.
Like single-mode hybrid systems now used by Toyota Motor Corp., Ford Motor Co. and others, the two-mode runs without the gas engine at low speeds, but unlike those systems, the electric motor contributes more power at higher speeds. Single-mode systems also have heavier motors, making them less ideal for towing.
The Escalade Hybrid has a suggested retail price of $71,685 for the front-wheel-drive version. That's $3,600 more than a fully loaded conventional Escalade, Schiavone said. He added that 90 percent of Escalade buyers get the fully loaded version, so the hybrid premium doesn't add much to the price. If gas remains at $4 per gallon, Cadillac calculates that buyers will recover the extra cost in about 3 1/2 years.
Schiavone said GM expects to sell 5,000 to 6,000 Escalade Hybrids in the first year, which would account for about 13 percent of its total Escalade production. The vehicle will be built in Texas and exported to Europe, the Middle East and China.