About 150 U.S. Cadillac Dealers to Exit Brand Rather Than Sell Electric Cars--4th Update
By Mike Colias
About 150 General Motors Co. dealers have decided to part ways
with Cadillac, rather than invest in costly upgrades required to
sell electric cars, according to people familiar with the plans,
indicating some retailers are skeptical about making the pivot to
GM recently gave Cadillac dealers a choice: Accept a buyout
offer to exit the brand or spend roughly $200,000 on dealership
upgrades -- including charging stations and repair tools -- to get
their stores ready to sell electric vehicles, these people
The buyout offers ranged from around $300,000 to more than $1
million, the people familiar with the effort added. About 17% of
Cadillac's 880 U.S. dealerships agreed to take the offer to end
their franchise agreements for the luxury brand, these people
The buyouts are an early sign of looming changes for car dealers
as traditional auto makers move aggressively into electric
Auto retailers will face upfront costs, such as electrical
upgrades to stores and heavy-duty lifts in the service department
to hoist electric cars, which generally are heavier than
gasoline-powered vehicles due to their large battery packs.
Some dealers have said they are wary of making upfront
investments when electrics now account for only about 2% of the
overall U.S. vehicle market, much of that Tesla Inc. sales.
Previous efforts by traditional auto makers to sell electrics have
struggled, leaving dealers stuck with models that are difficult to
sell, according to many dealers.
Cadillac global brand chief Rory Harvey confirmed that the
company offered buyouts to dealers, but declined to specify how
many had taken them or the value of the offers.
"The future dealer requirements are a logical and necessary next
step on our path towards electrification," Mr. Harvey said. Those
who aren't ready to make that commitment are getting fair
compensation for exiting the brand, he added.
Most dealers who accepted the buyout also own one or more of
GM's other brands -- Chevrolet, Buick and GMC -- and sell only a
handful of Cadillacs a month, the people familiar with the effort
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, for example, posing a threat to
dealers' parts and service business, a key profit source.
Electric-car leader Tesla operates without dealers, a model
several startups intend to follow.
"The way dealers make money selling electrics will be different
than selling combustion-engine vehicles," said Erin Kerrigan, who
runs an advisory firm that helps dealers sell their businesses.
"There will be an opportunity for [auto makers] to rethink their
Cadillac is set to play a central role in GM's electric-vehicle
push, which is among the most aggressive of legacy auto makers.
The nation's largest car company last month said it will boost
its spending on electrics, as well as driverless-car development,
by more than a third compared to previous plans, up to $27 billion
by mid-decade. That represents the majority of GM's planned capital
spending, even though electrics account for only about 2% of its
global sales today.
Mr. Harvey said he views Cadillac's broad network of dealerships
as a competitive advantage. But to prepare for the influx of
electric models that will hit showrooms in the coming years,
dealers need to start making significant upgrades now, GM
The buyout will shrink Cadillac's dealership network, which is
nearly triple the size of luxury competitors like Lexus and Audi.
GM executives and some Cadillac dealers for years have said the
large dealership footprint crimps the profitability of Cadillac
outlets and hurts the brand's cachet.
Minnesota Cadillac dealer Todd Snell said he views the upfront
costs for electric cars as an investment in the future, even if
he's uncertain how quickly sales will take off, especially in his
"I'm not 100% convinced electric cars will be the silver bullet
everyone says they will be, but I do think they will become an
important part of the business," Mr. Snell said. "We're looking to
get bigger and hopefully be around for the future."
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
December 04, 2020 15:49 ET (20:49 GMT)
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