Some dealers aren’t too happy about being forced to sell electric Cadillacs. Partly because GM is requiring them to spend $200,000 for charging infrastructure and service equipment. The idea of having only electric vehicles to sell and having to shell out that much money was too much for some. So, Cadillac offered dealers between $200,000 to $1 million to fold up if they don’t like Cadillac’s terms. It has caused almost 20% of Cadillac’s dealer network to quit.
This is not a striking endorsement of Cadillac’s electric direction
This is not exactly a striking endorsement of Cadillac’s newfound electric direction. Especially during a pandemic. But let’s be honest, GM has wanted to see Cadillac with fewer dealers for years. The fewer dealers the more the remaining ones can make on similar inventory. Of course, that’s assuming that a potential buyer must have a Cadillac.
Overall, fewer dealers mean higher sales through-put. That usually means higher margins. Once you factor in Lexus, Mercedes, et al, that philosophy may not be so true. But BMW and Mercedes both have around 350 dealers in the US. Cadillac has 880. Fewer dealers make for less supporting costs to GM.
If the remaining dealers sell more cars they are making more margin
If the remaining dealers sell more cars then they are making more which means they will give less pushback when corporate needs them to spend on physical improvements, service upgrades, or better staffing. According to the Wall Street Journal, a lot of the owners of these Cadillac dealers have other franchises. Since Cadillac sells fewer amounts of vehicles than a Chevy or Nissan franchise it gets less attention. An owner with a stand-alone Cadillac store to address will give it more focus.
In the past, GM has offered similar buyouts seeking to slim down its dealer network. Back in 2015, Cadillac launched Project Pinnacle which burdened dealers with expensive upgrades. It was meant to burnish dealers’ images and facilities to better compete with the Japanese and European brands. That is also when GM offered buyouts similar to those offered now.
Cadillac has seen sales increases with the XT6 SUV
Cadillac has seen sales increases with the XT6 SUV this year. It is banking on the Lyriq becoming similarly popular. And as it rolls out its EVs while clipping back gas-powered vehicles it needs all of its dealers to offer excellent consumer relations and service.
Cadillac may be a bit premature with its buyouts but for most aware dealerships the writing’s on the wall. EVs may be a slim segment of sales today but with ICE vehicles seeing bans within the next 10 years what other types of vehicles will these dealers have? But, if as a dealer you can’t get behind the new products you are seeing then maybe a wad of cash and retirement is a preferred alternative. At least that’s what it looks like.