For so long automakers have been concerned about whether or not consumers would be excited about electric vehicles, it may never have occurred to them that dealers wouldn’t want to sell them.
General Motors is finding out the hard way after a rumored 150 Cadillac dealers are willing to take buyouts, some as high as $500,000, to drop the brand rather than invest $200,000 into facilities and training to sell battery-electric vehicles, starting with the new Lyriq coming next year.
Rory Harvey, Cadillac’s top executive, told the Wall Street Journal that GM did offer buyouts to dealers; however, he did not elaborate on how much the auto company was offering or how many dealers accepted them.
“The future dealer requirements are a logical and necessary next step on our path towards electrification,” Harvey told the WSJ, noting the company was offering what he believed was fair compensation.
There are only 880 Cadillac dealers across the United States, and with the luxury brand expected to be heavily weighted toward EVs as part of GM’s master plan, having enough “qualified” dealers available in less populous areas becomes critical.
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. However, the pricey addition for an uncertain return has some dealers raising their hands and accepting the payout.
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.
General Motors CEO Mary Barra has repeatedly said the automaker is on a “path to an all-electric future,” and confirmed the company will spend $27 billion in the next four years on the development of these vehicles, bringing out 30 of them during that time.