Cadillac Dealers Betting Big on EV or Taking the Chips Off the Table?

A Blog Post by Sean Reyes, Chief Marketing Officer for Recall Masters

 

As the nation attempts to further reduce emissions, many states have begun initiatives to phase our gas-powered vehicles. At the moment, multiple problems exist if someone were to snap their fingers and make every vehicle electric. On the vehicle and infrastructure side, there is a lack of charging stations and range is limited. While these are increasing (and will certainly continue to do so), many current electric vehicle owners are forced to plan their routes based on charging station locations. On the dealership side, EVs account for a small percentage of their overall inventory and an insignificant stream of revenue on the service side. Dealers need to stay in business and, to do that, have to sell and service cars. Also, many dealers are not equipped to service EVs at a decent capacity due to a lack of trained technicians.

So, some pretty significant challenges exist for both consumers and dealers.

However, according to an article on EnGadget, the Cadillac brand is pretty much forcing its dealers to invest heavily in selling and servicing electric vehicles in the near future. That GM mandate, of course, comes with a significant dealership investment (roughly $200,000) to upgrade facilities. Cadillac is so committed that it has offered buyouts to dealerships that would rather not commit to necessary upgrades. According to the Wall Street Journal, 150 Cadillac dealers have already accepted buyouts, effectively reducing the number of Cadillac dealerships by 17%. It was not that long ago that some dealerships gave up their Cadillac franchises as low volume stores were forced to ONLY sell new Cadillacs when inventory was low and hard to acquire.

Dealers are being forced to either invest in Cadillac’s vision of the brand’s future via a large investment, or bail on the brand. And can you blame them for exiting the brand? They have money on the table right now from Cadillac (anywhere from $300,000 to $1 million) to exit the brand as a dealership. But who knows how long that offer will be on the table?

According to Automotive News, GMC stated that it has no plans to offer buyouts to its non-EV dealers. One could make an argument that this is an A/B test on a large scale, with GM pushing its lower volume dealers to comply with this new mandate, while telling its higher-volume brands that there will be no buyouts. Many GM dealers are watching this scenario unfold and wondering whether the manufacturer could force their hand without compensation. And, thus far, policies like this have been limited to GM and the Cadillac brand. What, if anything, are other manufacturers considering? Perhaps they are waiting to see how this scenario plays out.

One thing we do know is that California has banned the sale of new gas-powered vehicles starting in 2035. That might seem like a long way off, but it is not. And perhaps more importantly, how does it affect consumers? Every dealer that closes its doors forces its service customers to find a new dealership for their maintenance and recall work. Those dealerships could be at locations inconvenient to the consumer, which could easily result in a decrease in safety recall and other major repairs.

We have already been fighting alongside NHTSA to increase safety recall compliance. By making it even harder for consumers to get those repairs achieved due to further inconvenience and lack of technician training, we could sadly see the progress that has been made go backward.

Recall repair completions have long been an uphill battle. Now we have to add to that equation less authorized service centers for consumers to get them done, a longer wait time, and a lack of trained technicians, as well as future recalls added. All I can anticipate is the recall completion rate going backward instead of the continued progress we have been enjoying. Only time will tell.

 

About the Author

Sean Reyes Chief Marketing Officer sean@recallmasters.com

Sean Reyes oversees all marketing efforts at Recall Masters as Chief Marketing Officer. Sean’s experience spans more than 25 years of business development and strategic marketing experience, having developed go-to-market products and solutions for the automotive, healthcare, insurance, finance and technology industries to serve Fortune 1000 clients like American Express, Toshiba, Western Digital, Cox Communications, Novartis, Microsoft, IBM, Compaq, HP, National General Insurance, MyCustomer Data, DigniFi and several automotive affiliates and dealerships. Sean lives in Napa, CA with his wife Kathryn and spends his free time hiking, kayaking, playing guitar, going to concerts, rebuilding project cars and helping his kids embark on adulthood.