About 150 U.S. Cadillac Dealers to Exit Brand Rather Than Sell Electric Cars--3rd Update
December 04 2020 - 3:55PM
Dow Jones News
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
battery-powered vehicles.
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
said.
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
said.
The buyouts are an early sign of looming changes for car dealers
as traditional auto makers move aggressively into electric
vehicles.
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.
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
franchise models."
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 would 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.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
December 04, 2020 15:40 ET (20:40 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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