About 150 General Motors Co. dealers have decided to part with Cadillac, rather than invest in expensive upgrades needed to sell electric cars, according to people familiar with the plans, indicating some retailers are skeptical Versus the use of battery-powered vehicles.
GM recently gave Cadillac dealers a choice: Accept a buyout offer to exit the brand or spend about $ 200,000 on dealer upgrades – including charging stations and repair tools – to get their stores ready to sell electric vehicles, these folks said.
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Buyout offers ranged from about $ 300,000 to over $ 1 million, the people familiar with the added effort. About 17% of Cadillac’s 880 U.S. dealers agreed to take up the offer to end their luxury brand franchise agreements, these people said.
Most of the dealers who accepted the buyout also own one or more of GM’s other brands – Chevrolet, Buick and GMC – and only sell a handful of Cadillacs per month, the people familiar with the effort said.
The skepticism of some Cadillac dealers underscores that even as investors increase the value of electric vehicles, questions remain about the interest of consumers and the retailers they serve.
Tesla Inc. has become an electric vehicle juggernaut by selling directly to customers, without franchise dealers, a model several startups plan to follow. Traditional car makers, on the other hand, have the task of overlapping their electric car plans with dealer networks that today make their money selling gasoline cars.
Dealers of different brands say they are weighing expensive investments in facilities, such as upgrades to electrical systems, against uncertainty about the demand for the vehicles, which now account for about 2% of US car sales. Some retailers say they are delaying orders for electric models because they fear they will sit on their lots for too long.
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Even in markets where electric vehicles are more popular, such as San Francisco, dealers say the lack of commuting during the pandemic led to a decline in demand for cars like GM’s Chevrolet Bolt.
Rory Harvey, head of Cadillac’s global brand, confirmed that the company was offering buyouts to dealers, but declined to specify how much they had taken or the value of the offers.
“The future dealer requirements are a logical and necessary next step on our road to electrification,” said Mr. Harvey. Those not ready to make that commitment will receive fair compensation for leaving the brand, he added.
As plug-in models take up more space in showrooms, they are also likely to reshape the economics of running a dealership, analysts and executives say. Electric vehicles have fewer components and require less frequent maintenance, which, for example, threatens the parts and service activities of dealers, a major source of profit.
“The way dealers make money by selling electric cars will be different from selling combustion engine vehicles,” said Erin Kerrigan, who runs a consultancy that helps dealers sell their businesses. “There is an opportunity [auto makers] to rethink their franchise models. “
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Cadillac will play a central role in the push of GM’s electric vehicles, one of the most aggressive automakers of the past.
The nation’s largest auto company said last month it would increase its spending on electricity and the development of self-driving cars by more than a third from previous plans, to $ 27 billion by mid-decade. That represents the bulk of GM’s planned capital expenditures, although electricity represents only about 2% of its global sales today.
Mr. Harvey said he sees Cadillac’s wide network of dealers as a competitive advantage. But to prepare for the influx of electric models that will hit showrooms in the coming years, dealers now need to start making upgrades, GM executives say.
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The buyout will shrink Cadillac’s dealer network, which is nearly three times the size of luxury competitors such as Lexus and Audi. GM executives and some Cadillac dealers have for years said that the dealership’s large footprint is diminishing the profitability of Cadillac outlets and hurting the brand’s cachet.
Minnesota Cadillac dealer Todd Snell said he sees the initial cost for electric cars as an investment in the future, even if he’s not sure how quickly sales will increase, especially in his farming community.
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“I’m not 100% convinced that electric cars will be the silver bullet that everyone says they will be, but I do think they will become an important part of the business,” said Snell. “We want to get bigger and hopefully be there in the future.”
Cadillac executives see GM’s focus on electric vehicles as an opportunity to transform the image of the luxury brand, which has seen its U.S. market share decline steadily since it lost its status as the No. 1 U.S. luxury brand through sales in the late 1990s. .
Cadillac will get the first-choice of innovations in electric vehicles as the company rolls them out, and dealers could not have plug-in models until 2030, GM executives said.
The brand’s first all-electric model, a sporty crossover SUV called the Lyriq, is expected to hit the market in spring 2022.
Cadillac dealer Claude Burns plans to spend the money to sell electric vehicles, but he’s unsure how quickly he’ll be able to recoup his investment, which he thinks will ultimately be less than $ 200,000. But he also noticed the growing number of Teslas on the roads around his community of Rock Hill, SC, about 25 miles south of Charlotte.
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“It looks like this electric vehicle market is about to take off,” he said. “So I decided I would stay with Cadillac.”
—Nora Naughton contributed to this article.
Write to Mike Colias at [email protected]