About 150 General Motors Co. dealers have decided to separate from Cadillac, rather than invest in expensive upgrades required to sell electric cars, according to people familiar with the plans, indicating that some dealers are skeptical about turning to battery-powered vehicle.
GM recently gave Cadillac dealers a choice: Accept a takeover bid to spend 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 people said.
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The takeover bids ranged from about $ 300,000 to more than $ 1 million, the people familiar with the effort. About 17% of Cadillac’s 880 US retailers agreed to accept the offer to end their luxury brand franchise agreements, these people said.
Most dealers who accepted the purchase also own one or more of GM’s other brands – Chevrolet, Buick and GMC – and sell only a handful of Cadillacs per month, say those familiar with the effort.
Skepticism from some Cadillac dealers underscores that even when investors bid on the value of electric vehicles, questions remain about the interest of consumers and dealers who serve them.
Tesla Inc. has become a juggernaut for electric vehicles by selling directly to customers, without franchisees, a model that several start-ups intend to follow. Traditional car manufacturers, on the other hand, have the task of transferring their electric car plans to dealer networks that today make money from selling petrol-powered vehicles.
Brand dealers say they weigh expensive capital investment, such as electrical system upgrades, against uncertainty about vehicle demand, which now accounts for about 2% of U.S. vehicle sales. Some retailers say they are canceling orders for electric models, worried they will be sitting on their goods for too long.
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Even in markets where electric cars are more popular, such as San Francisco, dealers say the lack of commuting during the pandemic has led to reduced demand for cars such as GM’s Chevrolet Bolt.
Cadillac Global Brand Manager Rory Harvey confirmed that the company offered purchases to resellers, but declined to say how many had taken them or the value of the offers.
“The future reseller requirements are a logical and necessary next step on our path to electrification,” says Harvey. Those who are not ready to make this commitment 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 economy to run a reseller, say analysts and executives. Electric cars have fewer components and require less frequent maintenance, for example, they pose a threat to dealers’ parts and service activities, an important source of profit.
“The way dealers make money selling electricity will be different from selling internal combustion motor vehicles,” said Erin Kerrigan, who runs a consulting firm that helps dealers sell their businesses. “There will be an opportunity for [auto makers] to rethink their franchise models. ”
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Cadillac will play a key role in GM’s electric vehicle pressure, which is among the most aggressive of older automakers.
The nation’s largest car company last month said it would increase its spending on electricity, as well as the development of driverless cars, by more than a third compared to previous plans, up to $ 27 billion by the middle of the decade. It represents the majority of GM’s planned investments, even though electricity only accounts for about 2% of its global sales today.
Mr Harvey said he sees Cadillac’s broad network of dealers as a competitive advantage. But to prepare for the influx of electric models that will hit showrooms in the next few years, retailers need to start making upgrades now, say GM executives.
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The acquisition will shrink Cadillac’s dealer network, which is almost three times as large as luxury competitors such as Lexus and Audi. GM executives and some Cadillac dealers for several years have said that the large dealer footprint is shrinking the profitability of Cadillac stores and damaging the brand’s cachet.
Minnesota Cadillac dealer Todd Snell said he sees the cost of electric cars as an investment in the future, although he is unsure how quickly sales will pick up, 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 think they will be an important part of the business,” says Snell. “We want to be bigger and hopefully be part of the future.”
Cadillac executives see GM’s electric car focus as a chance to transform the image of the luxury brand, which has seen its US market share steadily slide since it lost its status in the late 1990s as the No. 1 luxury brand in the United States through sales.
Cadillac will get the first dibs on innovations with electric vehicles when the company rolls them out, and its dealers can include plug-in models only in 2030, GM executives have said.
The brand’s first all-electric model, a sporty crossover SUV called the Lyriq, is scheduled to go on sale in the spring of 2022.
Cadillac dealer Claude Burns plans to spend the money to sell electric vehicles, but he is unsure how quickly he will be able to recoup his investment, which he estimates will be less than $ 200,000. But he also noted the growing number of Teslas on the roads around his community Rock Hill, SC, about 400 miles south of Charlotte.
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“To me, it looks like this electric car market may be picking up,” he said. “So I decided to stick with Cadillac.”
—Nora Naughton contributed to this article.
Write to Mike Colias at [email protected]