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About 150 U.S. Cadillac Dealers to Exit Brand, Rather Than Sell Electric Cars
- Scoundreller 6y ago> Accept a buyout offer to exit from the brand or spend roughly $200,000 on dealership upgrades > The buyout offers ranged from around $300,000 to more than $1 million Seems like slow-moving Cadillac dealerships held out and got a good opportunity to leave. Possibly Cadillac won too by forcing down a lower buyout price on members that they didn’t want to keep either?
- toomuchtodo 6y ago“Declining brand dealerships accept generous buyout offer” Edit: Auto dealership businesses are traditionally lucrative (service revenue, mostly, based on my conversations with franchise owners), and if $200k in capex wasn’t worth it (based on forecasted future revenue and profit), I think that says volumes about the future of the Cadillac brand.
- syshum 6y agoYou have exposed the problem with electric cars and dealership though. Electric cars do not need as much service, ALOT LESS infact. Thus the dealership will have to get more revenue from the initial sale instead of reoccurring service revenue. If the brand/dealership is already struggling switching to electrics is likely going to be a negative revenue hit for any dealership that survives on service revenue
- toomuchtodo 6y agoAgreed! All dealerships are dead long term (with possible exits/buyouts offered by manufacturers for service center/gallery conversions to match what Tesla has). Just like layoffs come in waves in struggling enterprises, this is just the first salvo.
- syshum 6y agoWell regulations will ensure dealerships are around for a long long time to come. In most states it is illegal for the major companies (Ford, GM, Toyota, Honda, etc) to sell direct to the public, once they start a dealer network that is how it has to be for all time. Tesla got around that because they were a new company with no dealer network, even then in some states laws were "updated" to prohibit direct sales.
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- RobRivera 6y agoI see zero reason for such laws to be in the interest of the general welfare. Break up market dynamics to introduce mandated middlepeople? So dumb.
- fiddlerwoaroof 6y agoI wonder if the thinking was that dealers have more buying power since they’re purchasing multiple cars from the manufacturer at once, so they are on more equal footing when it comes to negotiating with GM and Ford. Then, since there are multiple dealerships selling the same cars, they can compete with each other on price. Thus, in theory, allowing customers to purchase cars at a price closer to the “wholesale” price. Of course, once the systems exist, the dealers will lobby for their continued existence.
- wongarsu 6y agoIf dealers really have that negotiation edge they should be able to stay relevant with market dynamics alone, instead of lobbying to prevent direct sales.
- thirtyseven 6y agoUnless the manufacturers undercut the dealers until they're out of business, then raise prices.
- dawnerd 6y agoThe VW dealer I bought my e-golf from has been harassing me to do my yearly oil change. And each time I have to tell them that no, my car doesn't need an oil change. They still insist on a yearly "service". I'm sure these dealerships will invent things that need to be serviced yearly.
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- krrrh 6y agoHaving done a a lot of consulting for car dealerships, I’d wager that it’s more likely that their appointment reminder system is held together by duct tape and baling twine, and getting it to schedule smarter based on the data in the dealer management system is so complicated that it’s probably using default values from when it was first set up 8 years ago.
- cybwraith 6y agoOof, so true. Dealer software is stuck in the 90s.
- yourapostasy 6y ago> ...I’d wager that it’s more likely that their appointment reminder system is held together by duct tape and baling twine... The conventional car industry has coming up on two decades of observing what Tesla did right with their software and customer service experience, and what they screwed up. Tesla is still very vulnerable (QC, capacity, and infrastructure), and that window is closing fast. If conventional car dealerships become economic roadkill in the future, they only have themselves to blame.
- ashtonkem 6y agoThe big issue with the traditional car industry is how fragmented it is. OEMs, third party websites, and individual dealerships are not only on different tech stacks, they’re financially independent companies that by and large can’t be forced to work together. It’s not uncommon for OEMs to pay dealerships for data through third party websites, since they lack the ability to share certain types of data directly. One of Tesla’s advantages is unquestionably their more centralized structure. They can make changes that other OEMs can’t.
- pkaye 6y agoOr maybe we need smaller or fewer dealerships.
- maxerickson 6y agoWhat does it say? Isn't the lower service cost a feather in Tesla's cap when they come up? Who loses those dollars when GM sells an electric Cadillac?
- toomuchtodo 6y agoDealerships are left out in the cold without service dollars.
- maxerickson 6y agoYou said it said something about the brand. Dealers aren't the brand.
- toomuchtodo 6y agoDealers accepting the buyout are them bailing on the brand due to perceived lower long term value of said brand (versus the investment being asked of them). My apologies I wasn’t more clear upfront. The thesis isn’t just less service required electric vehicles, but Cadillac brand loyalty dying off with older customers (Cadillac has the oldest customer base in the auto industry). Similar situation with Harley Davidson [1]. [1] https://www.reuters.com/article/us-harley-davidson-electricbike-focus-idUSKBN1WM10N https://www.reuters.com/article/us-harley-davidson-electricb... (Harley struggles to fire up new generation of riders with electric bike debut)
- maxerickson 6y agoIt's a small transaction, and GM is on the other side of it, spending money to push the brand towards electric instead of letting it stagnate. Are 150 (likely small volume) dealers a great bellwether?
- toomuchtodo 6y agoYou could be right. Time will tell as more jurisdictions enact combustion vehicle sales bans and brands transition to electric or die. Single data points aren’t as helpful as momentum signal.
- BrianOnHN 6y agoSometimes the local population can only see into the local future. Unfortunately, those decisions impact the local grandchildren, who will live in the long-distance future. It's refreshing to see a singular board room decision lead to a better long-distance future.
- willio58 6y agoYeah I wouldn’t read too much into this. It’s good for the brand to cull the heard of non-believers.
- AnimalMuppet 6y agoFirst, it's a "herd". Second, 17% is a lot of dealerships. I mean, I presume that these are the dealerships that aren't selling all that many cars, but... what total sales volume did they account for. 5%? 10%? Does Cadillac want to lose that much of their total sales? Do they want to pay money to lose that much of their total sales? And, really, pay $300,000 for a dealership to go away, because the dealership wouldn't pay $200,000 for a charging station. Why not, you know, put up the $200,000, and keep the dealership?
- krrrh 6y agoCadillac is a sub brand of GM, and most of these dealers probably did small volume on Cadillacs while their bread and butter was GM. For instance I consulted a group of Ford dealerships, only one of which had a Lincoln franchise. To keep the Lincoln brand they needed to do stuff like have a separate branded entrance and minumum floorspace for the Lincoln side of things, etc. At some point it’s not worth it if 95% of your revenue comes from selling the mainline brand.
- Scoundreller 6y agoI wonder if, at some point, a brand will subsidize those costs just to keep a foot in a market (if they fail to take the bait and cover the cost themselves).
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- unreal37 6y agoThey'd have to pay $200,000 to all dealerships, not just the ones who wanted to leave. Plus I am sure that equipment takes up land/space, and reduces the number of service bays. And requires trained staff. $176 million is different than $20 million. And that's not the only cost the dealers are incurring including reduced revenue from land that could be used to sell cars.
- x87678r 6y agoI saw a hybrid Cadillac ELR on the road the other day. That's damn fine looking car. I predated only 3000 sold 2013–2016?
- beamatronic 6y agoIt really is a beautiful car. But I'm not sure who it's really for - not a big audience.
- dade_ 6y agoBefore I bought my Volt, I tried finding an ELR. Definitely a finer option, but nearly double the price without rebates. None to be found though.
- HeavenFox 6y agoI am actually surprised any sold at all. Who on earth is paying $75k for a car that is neither fast nor luxurious, and only has two doors? Even at $50k there are much better options out there...
- dbt00 6y ago> Most dealers who accepted the buyout also own one or more of GM’s other brands—Chevrolet, Buick and GMC—and sell only a handful of Cadillacs a month, the people familiar with the effort said. Most of these dealerships amount to hobbies or upselling opportunities for other GM brand dealers. This is probably less of a story than it appears.
- dmix 6y ago> Dealers across brands say they are weighing costly facility investments, such as electrical-system upgrades, against uncertainty about demand for the vehicles, which now account for about 2% of U.S. vehicle sales. Some retailers say they are putting off orders of electric models, worried they will sit too long on their lots. It was probably a bad time to make such a request ($200k investment or sell) in the middle of a pandemic.
- taurath 6y agoCar sales are back up to pre pandemic levels! But yeah I’ll bet there’s lots of folks who are not bringing their cars in for service as much with less commute.
- poma88 6y ago"SOCIAL TIPPING POINTS", please read with irony.
- dstick 6y agoCadillac of sales? ...I’ll show myself out.
- PragmaticPulp 6y agoThe real details are buried in the article. Dealerships were required to either spend at least $200K on charging stations and other upgrades, or they could take a buyout offer for $300K to $1 million. About 17% of total dealerships took the deal. I assume many of those were already declining and chose the convenient exit option instead of doubling down on their already declining dealership investment in the middle of a pandemic. > The buyout offers ranged from around $300,000 to more than $1 million, the people familiar with the effort added. About 17% of Cadillac’s 880 U.S. dealerships agreed to take the offer to end their franchise agreements for the luxury brand
- santiagobasulto 6y agoThis is why I read the comments first. Thanks for doing my homework.
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- NullPrefix 6y agoOnce there's enough comments reading the actual article becomes pointless
- ngcc_hk 6y agoWow, that is what most of us do in good sites like HN. The signal to noise level is way beyond normal. Thanks all.
- exabrial 6y agoThat doesn't really make a good headline
- VectorLock 6y agoUsing dealerships to build a charging network is a nice idea. The knock on benefit of getting car owners to your dealership more frequently and hopefully selling more cars.
- netsharc 6y agoGeez, talk about a misleading headline (from WSJ), it's almost click-baity before you read the sub-headline. It's the kind of title where some people (ok, I) jump to the conclusion that "OMG those climate-hating old-fart car salesmen!". A better headline would be "...Rather Than Invest to Sell Electric Cars"
- stevehawk 6y agoheadline could have said "dealerships spending more money to sell Cadillacs than they make opt to quit selling Cadillacs."
- codazoda 6y agoI think electric is inevitable at this point but I also have my doubts that Cadillac is the brand to bring it to us. I've got a hybrid and I'm not sure I can ever go back. The mileage is amazing but so is sitting in your car with the AC or heat running while the engine is off. It was also amazing when I left an interior light on while I was camping and ran my 12v battery dead; press a button to recharge. I do pause at the thought of an all electric because I want to be able to do the long road trips we have in the U.S. I'm willing, however, to spend 30 minutes at stops every few hundred miles, when there are enough of them (which is very nearly now). Range is getting close to what I would need. Say, 300 miles per charge with an 80% charge on a fast charger in 30m. Looks like Tesla already beats that, at least on paper.
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- Hypx 6y agoPorsche is investing in e-Fuels. The internal combustion engine might not be totally dead. Plus, the EV of the future could be powered by fuel cells, not batteries. The problem with Cadillac is that GM tries to reinvent it every few years. At this point, no one knows what Cadillac is suppose to be now. If anything, it's on the same path that Oldsmobile and Pontiac were on, ultimately forcing them to shut down the brand.
- bruceb 6y agoNot sure why you are being voted down but you are correct about GM doesn’t know how to market Cadillac. LIt is an iconic name, every US President for the last 70+ years has been driven around in one, yet their ads are so mediocre and their designs are inconsistent. Only brand GM mangers worse is Buick, which stand for what? The people making the ads have no idea.
- Hypx 6y agoThe people making the ads are only responding to what their bosses want them to do. If the latter have no clue, the ads will be equally clueless. Plus, the Presidential Limo is just a truck platform with a Cadillac logo on it. I'm sure they can switch to Lincoln, or no badge at all.
- alricb 6y agoCadillac has wanted to get rid of smaller dealers for some time [1] [1]: https://www.thetruthaboutcars.com/2016/09/cadillac-president-will-pay-dealers-disappear/ https://www.thetruthaboutcars.com/2016/09/cadillac-president...
- tamade 6y agoIf I was a caddy dealer, I'd take the buyout too (and buy $TSLA)
- S_A_P 6y agoSo the headline is written in a way that I read it as car dealers are being obstinate and not wanting to sell electric cars. Secondly, the deal as I understand it is very similar to one proposed by Johan de Nysschen a few years back just to cull the dealership network and make it more exclusive. (that at the time IIRC most dealerships roundly rejected) I didnt get past the paywall so maybe it explains better, but I believe the current deal will cost the existing dealers a lot of money to convert over to the new electric format which wont be worth it to smaller dealers or dealers that sell a mix of brands(also usually smaller dealers). Honestly, it seems like GM is again mishandling its flagship brand and reacting to market conditions instead of trying to steer the market or push technology. They have been doing this for at least 3 decades now, and I dont understand why. Cadillac shouldnt be a volume brand, and they also shouldnt push for profit over everything else. Cadillac should be the GM Halo, with the most R&D and engineering resources creating the tech and engineering that filters down to the volume brands. Instead they tried to be more BMW and Mercedes Benz than BMW and MB was. They of course failed miserably at that. Some good cars were produced, but they ended up compromised in some way that would make purchasing that over a German competitor pointless. Usually this was in the interior quality which was and remains subpar vs competition. Next they got 'blindsided' by the switch in consumer preference to SUVs. I dont see how this was ever the case as the Escalade has been their bread and butter since ~2000. From what I understand the CT6 was going to become a RWD platform for a lux SUV(which would have probably been great) but GM got cold feet and instead adopted the C1XX FWD platform which while is serviceable is hardly class leading. They developed a brand new ICE engine called "Blackwing" that was state of the art. They placed it in the CT6 for about a year only to cancel that car and realize the engine doesnt fit any other platform they make. I cant even fathom how much was lost in that deal. Ok now they want to go all in on electric, with the only other electric being the tarted up Chevy called the ELR. I suspect that the result will end up being too expensive to recoup development costs, and if past performance is an indicator it will get canceled right as the bugs are worked out and it becomes viable. This is where Cadillac needs to actually commit to really going all in and get the freaking accountants out of the pipeline. Sure building cars is hard and expensive and risky. Cadillac used to be aspirational and forward thinking until the 60s. I suspect they didnt make a lot of money back then either. Of course maybe Im just an armchair quarterback here but from my perspective they are rudderless.
- coward8675309 6y agoWhile incumbent car manufacturers may or may not envy Tesla's technology, market cap, grassroots enthusiasm, et cetera, they so, so, so very much envy Tesla's ability to dispense with a dealer network. Auto reporters in the past hammered on GM, for example, for its uninspired "badge engineering" i.e. creating nearly identical cars for Pontiac, Chevy, Buick, and so forth. The reality was that GM didn't want to do it — they say it as a big distraction — but the company had to deal with their dealer networks, which would complain loudly if a variant of the latest hot model for some other emblem weren't available for them. Reading the article, I'm wondering if GM tried to induce as many dealerships as possible to ask for a buy-out. In the age of company-owned and branded stores — Tesla is like an Apple Store for cars — for every product category except cars, GM may be trying to claw its way to controlling the consumer experience for Cadillac, its marquee brand, from soup to nuts.
- decafbad 6y agoLooks like everybody here has WSJ subscription, and many many other sites.
- perardi 6y agoSo, does Cadillac’s pivot to electric (boy they have had quite a few pivots over the past 20 years…) have much to do at all with North America, or is it for China, which is their largest market for Cadillac?
- ogre_codes 6y agoFor dealerships spending $200k on upgrades to support EVs has to be a bitter pill to swallow. Fundamentally EVs are lower maintenance, so that big Capex is going to end up with questionable returns. Taking the payout would have been an easy choice for many, particularly if they could maintain the rest of their Chevy branding.
- elihu 6y agoMaybe this is in the part of the article behind the paywall, but what about GM's other brands? Wouldn't dealerships that sell other electric cars like Chevy Volts require the same sort of equipment? Is there something special about the Cadillac equipment that's more expensive or different than what's needed to service any other GM electric car?
- jskajakzkjx 6y agoWhy did Cadillac need to offer the buyout? Could Cadillac just tell dealers that the chargers are a requirement to keep being a dealer? Could a dealer that doesn’t want to install the chargers reject the buyout and keep operating?
- judge2020 6y agoThe contracts between GM and the dealership for carrying the brand don't allow either side to make sudden requirements (like installing $200k worth of chargers) without changing the contract - these contracts usually last a long time, so the time for them to renew and require these chargers could be years in the future. Since GM doesn't want to stagnate on electric cars, they're offering the buyout since they have new electric Cadillacs coming soon and you don't want a dealership to not carry certain cars just because they declined to install chargers.
- bagacrap 6y agoif what you say is true, what's stopping a dealer from saying no to both options?
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- jskajakzkjx 6y agoI wonder if there is some kind of collective bargaining among dealers in the negotiations with GM, that binds all the dealers. Or if the buyouts are just too good to refuse.
- imtringued 6y agoBased on other HN comments it sounds like GM wants to reduce the number of Cadillac dealers because it's GM's luxury brand. Basically they want to imitate Tesla's business model. These dealers just do Cadillacs as a side gig anyway. They mostly sell other GM brands.
- whalesalad 6y agoSeems odd considering a lot of Caddy dealerships are also Chevy or GMC dealerships - and you know those brands have EV vehicles coming down the pipe too.
- epa 6y agoBuyout makes sense for all parties as existing dealers obtain more of the declining cadillac buyer/owner market share.
- czottmann 6y agoArchived copy of full article: https://archive.vn/VIHaa https://archive.vn/VIHaa
- stevespang 6y agoElectric vehicles also require less service and maintenance. That's a hit to dealer profits and another reason dealers are skeptical. Anyone who has ever owned an American vehicle has probably experienced what I did as a younger man: American dealerships hustle you for service and parts. Several folks I have spoken to agreed that in Texas the average dealership hustle every time you brought your car there was ~$400. Once I bought foreign cars that all stopped, at least because I never really needed a repair, did the oil and filter changes myself, foreign cars are built better. Go figure.
- AtlasBarfed 6y agoAs stated in other comments, the buyout option may be the real driver of this, but in my estimation, these are the true challenges to mainline ICE selling EVs: 1) battery supply 2) resistance from dealers 3) lack of charging infrastructure 1 and 3 will probably be fixed. #2 may be more intransigent.