Cadillac Ready to Buy Out Dealers Who Won’t Go Electric

As Cadillac prepares to become an all-electric luxury brand it is offering dealers who don’t want to plug in incentives to go away.

For the last several years, General Motors CEO Mary Barra has said the automaker is on a “path to an all-electric future,” and the automaker last week said it would boost its spending on EVs and autonomous vehicles by 35% through mid-decade. While all GM brands will be part of the transition, the switch is expected to move particularly fast at Cadillac which hopes to be 100% electric by decades end.

But the luxury brand has been running into resistance from some dealers who are balking at spending the estimated $200,000 it will cost to install chargers, train staff and make the other investments needed by the time the brand’s first all-electric model, the Lyriq, reaches showrooms in 2022. For them, Cadillac is offering buyouts that can reach “upwards of $500,000” to give up their franchises.

(CEO Barra wants GM to be dominant global EV maker.)

“We wanted to move fast and make sure dealers are ready for the acceleration,” Mahmoud Samara, vice president of Cadillac North America, told trade publication Automotive News. “This is purely an option for those dealers who feel the EV journey is not suitable for them.”

This isn’t the first time Cadillac has looked at thinning its herd. For many decades it was the industry conventional wisdom that the strongest manufacturers had the largest dealer base. That perception began to change as imports moved into the mainstream in the 1970s and 1980s. And the arrival of foreign luxury marques like Mercedes-Benz, Lexus and BMW showed clear advantages to having fewer retail outlets.

Until now, however, buyout programs have had relatively little impact and Caddy still has far more dealers, based on sales volumes, than its key foreign competitors. But that appears to be set to change.

All-electric vehicles like the Lyriq will require some big investments by Cadillac dealers. They will have to install chargers, purchase new tools and then train both sales and service staff to deal with the new products. The typical investment is expected to run around $200,000 – but can run to several times that amount if a major renovation is required. For smaller dealers, that could make the difference between a profit and a loss.

(GM investing $2B to build Cadillac Lyriq at former Saturn plant.)

“Enough money is being offered” in buyout incentives “that it is clearly getting the attention of a lot of the smaller dealers,” Shawn Mercer, a Tallahassee, Florida attorney who represents a number of dealers in that region, told the trade publication.

The automaker has been generous, according to several of those quoted, with offers that are running at $300,000 or more, some dealers getting buyout bids topping $500,000. That sort of money can equal the sort of profits they otherwise might not see for five years or more.

“They’re looking at this as a godsend, almost,” said Stuart McCallum, an automotive consultant from Princeton, New Jersey.

For others, however, the money may not be worth getting out of the business, especially for those heavily dependent upon the Cadillac franchise. Good dealerships can go for millions of dollars when the market is strong. But one of the challenges will be to figure out whether the Cadillac brand is worth betting upon.

Automakers, in general, are pushing into the electric vehicle space at a pace few might have anticipated five years ago. And that’s particularly true of luxury brands that will face bigger challenges meeting new emissions and fuel economy mandates going forward. Electric powertrain technology can allow them to continue delivering the sort of power and performance high-line buyers demand, even as improved lithium-ion batteries allow for substantially more range.

(End of the “oil era”?)

Cadillac’s goal is to offer as much as 400 miles per charge, brand boss and GM’s North American President Steve Carlisle said earlier this year. He also said that Caddy hopes to be selling battery-electric vehicles exclusively by 2030.