Some Cadillac dealers have chosen to close rather than sell electric vehicles


Published on December 5, 2020 |
by Jennifer Sensiba

December 5, 2020 through Jennifer Sensiba

the le journal Wall Street reports that about 150 of Cadillac’s 880 dealers have chosen to stop selling the brand’s cars to avoid jumping into electric vehicle sales. Dealer upgrade costs may have been the deciding factor, but dealers continue to be a barrier to electrification.

Cadillac Lyriq SUV. Image courtesy of Cadillac.

As previously stated, Cadillac dealers were given a choice from General Motors: either request dealer upgrades to sell only electric vehicles, or accept a buyout of $ 500,000 to $ 1,000,000 to forgo. to their franchise. Dealers who choose to continue selling the brand must upgrade their repair equipment, install electric vehicle chargers, perform other upgrades, and take training to sell what will become GM’s first all-electric brand. Now we know what happened – about 17% of Cadillac dealers took the buyout option.

The deal does not immediately exclude dealers. On the one hand, they will have access to new Cadillacs until the end of 2021 and will be able to get top-notch bids on used Cadillacs at auction until 2024.

According to The reader, low volume dealers would not lose much because the buyout offer equals what they would earn in 5 years. According to le journal Wall Street, many of the dealerships that opted for the buyout were the smaller ones and often had one dealer selling multiple GM brands. With Cadillac’s sales volume only a small portion of their suit sales, paying for major upgrades was certainly the more expensive option.

On the other hand, lawyer Len Bellavia said Automotive news that a franchise alone is worth over $ 300,000 to $ 500,000 and for dealers looking long term, the money involved in the buyout offer is just not enough. “If I am 50 years old and I intend to keep [the dealership] for 20 more years and earn half a million a year, how does $ 300,000 to $ 500,000 make me complete? Any franchise at its worst could be worth over a million dollars, unrelated to the number of cars the dealership sells.

There are other reasons why the buyout might have seemed the better option, beyond upgrade costs or the fact that the dealership wasn’t very invested in the brand’s future.

On the one hand, dealers tend to make their profits on the service side of the operation. While there are some dealers who are making a healthy profit from their sales, most use the sales floor as a loss leader. Raising money for warranty repairs, selling service contracts to customers when they buy a car, and various other service jobs are what keeps most dealerships afloat, while new car sales are not. as a way to get people to the door and develop a relationship. Even used cars tend to be more profitable than new sales.

With electric vehicles, there is much less money to be made on the service. The amount is certainly not zero, as electric cars always have tires that can be replaced, suspension components that require maintenance, and repairs that need to be done under warranty. What hurts dealers is the lack of maintenance of internal combustion engines. No oil changes will be necessary, and single speed reducers or other parts of the drive unit generally do not need to be serviced as often as multi-speed automatic transmissions.

So, with a loss of profit in the more profitable part of the dealership, the buyout looks like a better deal.

Tesla’s continued push into states that currently do not host them may also be a small factor. As we have seen before, Tesla cannot operate sales or service facilities in many states because direct manufacturer-to-customer sales are not permitted under state law. This can make life difficult for Tesla owners.

“But why isn’t Tesla just franchise dealers?” One might ask. The answer is that Tesla knew that dealers would not want to sell EVs due to the loss of service business, so they decided to stick with direct sales despite the challenges. If states continue to provide exceptions for electric vehicle manufacturers to make direct sales to customers, then a Cadillac franchise for electric vehicles is not worth what it once was, and that may be a smaller factor in the reason why the dealers chose to take the buyout. .

As my colleague Steve Hanley pointed out, all of this can turn out to be a good result for the Cadillac brand. By clearing up the dealerships (especially the “we also sell these” dealerships), Cadillac cuts its expenses and helps focus potential customers on the brand itself. This increases profitability not only with reduced costs, but with less sales diverted to GM brands that still sell internal combustion models.

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Keywords: Cadillac, General Motors, GM, Lyriq

About the Author

Jennifer Sensiba Jennifer Sensiba is a lifelong vehicle enthusiast, writer and photographer. She grew up in a drivetrain shop and has been experimenting with vehicle efficiency since the age of 16 and drove a Pontiac Fiero. She enjoys exploring the Southwestern United States with her partner, children and animals. Follow her on Twitter for her latest posts and other random stuff: Do you think I’ve been helpful in your understanding of Tesla, clean energy etc? Feel free to use my Tesla referral code to get (and me) little perks and discounts on their cars and solar products.


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