7 ms·

GM offers to buy out Buick dealers that don't want to invest in EVs

29 points by smugma 4y ago

zrail 4y ago
Why not offer a financing facility? Surely a company the size of GM could negotiate low or no interest financing for dealers on the order of $400mm.
smugma 4y ago
I thought the Buick brand was dead. Zombie? Is this part of a plan to shrink footprint or transition to DTC?
- newaccount2021 4y ago
- a4isms 4y ago
  > transition to DTC? I see it as being less about selling direct to consumers and more about building an EV brand with a strong service story. Right now, there is a perception that Tesla ships cars with superior technology, offers a superior charging network, but against that consumers feel Tesla has poor build quality and problems servicing its vehicles. (This may be all or only partially true, but from a marketing perspective, what matters is whether customers perceive that these things are true, and the claim here is that they do.) GM has to play catch-up with tech, and is doing its best with stuff like Super-cruise: https://www.gmc.com/connectivity-technology/super-cruise https://www.gmc.com/connectivity-technology/super-cruise But until Tesla gets its quality and service act together, brands with dealership networks like GM can differentiate themselves with their dealer network, which is also a service network... Provided the dealers invest in the tech and training to sell and service EVs. Differentiating their products with "You can get it serviced quickly at your local Buick dealership" is not going to work if there's an asterisk and fine print that says "participating dealers only." So they're getting rid of the dealers who undercut an important part of their value proposition. Will it work? :shrug: But this appears to be what they are attempting to do by dropping dealers who won't service EVs. --- Elsewhere, Volvo is trying to have it both ways! Their Polestar brand is sold DTC, but serviced at Volvo dealerships. That avoids the negative perception of buying from dealers who add on ridiculous charges or markups, but allows them to promise Polestar buyers that service is readily available. TL;DR
  - zbrozek 4y ago
    Though not actually at all Volvo dealerships. A friend of mine regularly had to go for quite a long drive to a specific Volvo dealership to get his Polestar fixed. And there were quite a few trips.
    - a4isms 4y ago
      I did not know that Polestar service is optional with Volvo dealerships! Maybe that's exactly what GM does not want to happen with Cadillac and Buick EVs.
      - zbrozek 4y ago
        Yes, I think that's precisely the motivation. My friend was not thrilled about the combination of super buggy behavior and long drives for software updates that he should have been able to apply himself via removable storage.
  - KerrAvon 4y ago
    This is where Tesla’s lack of a PR department will eventually bite them. They should be actively marketing their service and quality rather than trying to sue criticism out of existence. The market won’t buy everything they put out forever.
    - bigbillheck 4y ago
      > actively marketing their ... quality I'm reminded of a certain idiom about a thing you can't polish.
- CommieBobDole 4y ago
  No, they got rid of Oldsmobile and Pontiac. Buick is not a popular brand in the US, but it was retained because (at least at the time) it was doing well in China.
29083011397778 4y ago
> The company offered similar buyouts to Cadillac dealers in 2020. About 320 of those 880 retailers accepted the offer rather than assume expectations to invest at least $200,000 toward upgrading dealerships for electric vehicles. The $200k is a hell of a pill to swallow, and more than I'd have assumed. I wonder if that includes training as well? Incidentally,I wonder if GM is seeing the trouble other OEMs are having with dealerships, and trying to move away from them.
- ceejayoz 4y ago
  $200k sounds like a minuscule amount of capital for a business with hundreds of $40-50k vehicles on hand.
  - kevinventullo 4y ago
    To be fair, the profit margins for dealerships on those vehicles are more like single-digit thousands.
  - WastingMyTime89 4y ago
    That’s 10% of the average pre-pandemic yearly pre-tax profit of a dealership if WardsAuto is to be believed. So very much doable but not insignificant.
    - ceejayoz 4y ago
      For a once in a generation shift in technology? There are probably individual pieces of equipment in the service department that cost more than that.
      - myself248 4y ago
        I doubt that very much. Fanciest machine in a stealership is probably the wheel alignment machine, and a top-of-the-line Hunter will set you back about $35k. The typical two-post lift that's in every bay is like $3000. The various dealer service tools (several-generation-old toughbooks with a 500% markup) are also in that ballpark. Then you've got various flush and fill machines, refrigerant recovery and vacuum, etc, in the $1-2k range each. And then there's a whole menagerie of special little jigs and thingamabobs that're probably each in the $20-200 range, but which save a lot of scraped knuckles and swearing and such. If you head to a performance tuning shop, you might find a 4-wheel chassis dyno worth about $50k or maybe more, but dealerships don't have those.
belltaco 4y ago
Aren't there laws in the US that prohibit car companies from owning dealerships?
- ceejayoz 4y ago
  Yes, in many states. The buyouts would be an incentive to sell the business to a new owner, not for GM to directly run the dealership.
- sithadmin 4y ago
  Yes. This isn't that kind of 'buyout' though. It's a contract buyout for early termination of a franchise agreement. GM gives dealer franchisee money; Franchisee stops selling Buick vehicles.
hbarka 4y ago
The handwriting is on the wall. Ford just had a great quarter with their EV lineup. The F-150 Lightning is sold out in participating dealerships. On average, the Lightning turned inventory in just eight days, the fastest ever for Ford. This is in spite of some dealerships who refuse to sell EVs or were playing dirty with exorbitant markups.
- spaceman_2020 4y ago
  Does GM have anything in the lineup close to the Lightning? Everyone who drove that couldn’t stop raving about it.
  - hbarka 4y ago
    On paper, the Silverado EV truck has specs that match or best the Lightning but we have to wait until 2024, late 2023. https://www.chevrolet.com/electric/silverado-ev https://www.chevrolet.com/electric/silverado-ev
  - BuckRogers 4y ago
    The latest revision of the Chevy Bolt is getting strong reviews in the cheaper end of the EV car segment. It may be the best around today in fact if you listen to Sandy Munro, a former Ford engineer that now does teardowns and provides consulting services to industry players. The F150 Lightning is currently indeed very special but it's a limited window of glory. Got to hand it to them for being first alongside Rivian. I'm largely looking at Toyota and possibly GM myself for my next couple vehicles. Toyota for obvious reasons. GM has Super Cruise, which in my opinion is better autonomous driving tech than what Tesla has. Companies are just charging more than I want to spend for the top autonomous driving tech. If I were an old timer with retirement money, I'd already have a vehicle with it. To your original question though, it won't be cheap, but a Silverado EV will offer a High Country trim with Super Cruise. It'll be a nice product. And while quality at GM and Ford has been lacking, and still is compared to Toyota, the EV era is granting them a chance at a big reset. Where they failed in the internal combustion era, they could salvage their reputation with this clean slate. They're just simpler vehicles so less for their bean counting ways and shoddy manufacturing to screw up. Super Cruise has me optimistic for GM as those are the type of things that will be key differentiators going forward.
kodah 4y ago
Personally, I'm very skeptical of these plans atm. I just went to go buy a Toyota Rav 4 Hybrid XSE. I have cash, so purchasing should not be hard - yet there are no Rav 4 Hybrid XSEs available and they're not taking orders due to availability. This applies to all EVs in my area. This was not something I've anticipated and I don't know how they're going to meet demand.
- smugma 4y ago
  Last month a friend was looking to buy a minivan (3 kids ages 1-3). The dealers either didn't have inventory or were charging $8-10K over MSRP. I suggested he try Cartelligent. They found him a car within 3 days at <$2K over MSRP. It was delivered from a dealer 130 miles away.
  - kodah 4y ago
    Unbelievable. I take it this was for a gas car?
    - smugma 4y ago
      Yes. I think he ended up with a Honda Odyssey.
- rblatz 4y ago
  Just a heads up, cash isn’t king anymore when buying a car. The dealers make considerable money from the finance portion of the transaction.
  - 7speter 4y ago
    I’ve been wondering if you could tell the dealer that you’d like to finance and then just pay the loan off in the short term, whether it be immediately or in a matter of months, or if there are normally provisions in car loans that prevent that?
    - I_dev_outdoors 4y ago
throw03172019 4y ago
Does anyone know what the $200k is used for? What kind of upgrades does a dealership need to sell EVs?
- aaaaaasss 4y ago
  fast solar-powered chargers?
- Bilal_io 4y ago
  I am just speculating, but at the very least they'd need some indoor and/or outdoor charging stations.
- bastawhiz 4y ago
  That's a fairly reasonable amount for increasing electrical capacity, laying cable, and installing chargers. You can't just put all your chargers on one circuit, and running a whole dealership means having plenty of available chargers. I'd also expect some of the cost goes towards purchasing tools and equipment for working with a significant volume of EVs. I'd expect some high voltage tools are simply not needed for most ICE vehicles.
FunnyBadger 4y ago
As an engineer, I do NOT believe EVs can ever be viable. The thermodynamics doesn't work. The supply chains do not work for either energy or manufacturing. I will never buy an EV because of the engineering analysis of this.
- rblatz 4y ago
- TheLoafOfBread 4y ago
  I agree, copper appears to be a major problem coming forward.
- scythe 4y ago
  The... thermodynamics? Surely you're joking? For supply chains see particularly http://en.wikipedia.org/wiki/Simon-Ehrlich_wager http://en.wikipedia.org/wiki/Simon-Ehrlich_wager
- WalterBright 4y ago
  There was a popular HN article a few days ago that claimed EVs had a drivetrain with 100% efficiency. My replies showing that was absurd were not well received :-) The article turned out to be written by a ski instructor. I emailed her with the math errors in her article, but received no reply. My conclusion is there's a lot of wishful thinking around EVs, although I agree that eventually EVs will be most of the market.
- sib 4y ago
  Interesting that the two in my garage seem quite real and manage to transport us quite effectively. My brother-in-law with the PhD in physics hasn't yet proven anything wrong with the thermodynamics. 10.0 for viability.
- fredoliveira 4y ago
- bigbillheck 4y ago
  Not sure how well that's supported by the empirical evidence there buddy.
4b11b4 4y ago
GM makes a move to squeeze out as much money as possible before dying

29 points by smugma 4y ago

Why not offer a financing facility? Surely a company the size of GM could negotiate low or no interest financing for dealers on the order of $400mm.

smugma 4y ago

I thought the Buick brand was dead. Zombie? Is this part of a plan to shrink footprint or transition to DTC?

newaccount2021 4y ago
a4isms 4y ago
> transition to DTC? I see it as being less about selling direct to consumers and more about building an EV brand with a strong service story. Right now, there is a perception that Tesla ships cars with superior technology, offers a superior charging network, but against that consumers feel Tesla has poor build quality and problems servicing its vehicles. (This may be all or only partially true, but from a marketing perspective, what matters is whether customers perceive that these things are true, and the claim here is that they do.) GM has to play catch-up with tech, and is doing its best with stuff like Super-cruise: https://www.gmc.com/connectivity-technology/super-cruise https://www.gmc.com/connectivity-technology/super-cruise But until Tesla gets its quality and service act together, brands with dealership networks like GM can differentiate themselves with their dealer network, which is also a service network... Provided the dealers invest in the tech and training to sell and service EVs. Differentiating their products with "You can get it serviced quickly at your local Buick dealership" is not going to work if there's an asterisk and fine print that says "participating dealers only." So they're getting rid of the dealers who undercut an important part of their value proposition. Will it work? :shrug: But this appears to be what they are attempting to do by dropping dealers who won't service EVs. --- Elsewhere, Volvo is trying to have it both ways! Their Polestar brand is sold DTC, but serviced at Volvo dealerships. That avoids the negative perception of buying from dealers who add on ridiculous charges or markups, but allows them to promise Polestar buyers that service is readily available. TL;DR
- zbrozek 4y ago
  Though not actually at all Volvo dealerships. A friend of mine regularly had to go for quite a long drive to a specific Volvo dealership to get his Polestar fixed. And there were quite a few trips.
  - a4isms 4y ago
    I did not know that Polestar service is optional with Volvo dealerships! Maybe that's exactly what GM does not want to happen with Cadillac and Buick EVs.
    - zbrozek 4y ago
      Yes, I think that's precisely the motivation. My friend was not thrilled about the combination of super buggy behavior and long drives for software updates that he should have been able to apply himself via removable storage.
- KerrAvon 4y ago
  This is where Tesla’s lack of a PR department will eventually bite them. They should be actively marketing their service and quality rather than trying to sue criticism out of existence. The market won’t buy everything they put out forever.
  - bigbillheck 4y ago
    > actively marketing their ... quality I'm reminded of a certain idiom about a thing you can't polish.
CommieBobDole 4y ago
No, they got rid of Oldsmobile and Pontiac. Buick is not a popular brand in the US, but it was retained because (at least at the time) it was doing well in China.

29083011397778 4y ago

> The company offered similar buyouts to Cadillac dealers in 2020. About 320 of those 880 retailers accepted the offer rather than assume expectations to invest at least $200,000 toward upgrading dealerships for electric vehicles. The $200k is a hell of a pill to swallow, and more than I'd have assumed. I wonder if that includes training as well? Incidentally,I wonder if GM is seeing the trouble other OEMs are having with dealerships, and trying to move away from them.

ceejayoz 4y ago
$200k sounds like a minuscule amount of capital for a business with hundreds of $40-50k vehicles on hand.
- kevinventullo 4y ago
  To be fair, the profit margins for dealerships on those vehicles are more like single-digit thousands.
- WastingMyTime89 4y ago
  That’s 10% of the average pre-pandemic yearly pre-tax profit of a dealership if WardsAuto is to be believed. So very much doable but not insignificant.
  - ceejayoz 4y ago
    For a once in a generation shift in technology? There are probably individual pieces of equipment in the service department that cost more than that.
    - myself248 4y ago
      I doubt that very much. Fanciest machine in a stealership is probably the wheel alignment machine, and a top-of-the-line Hunter will set you back about $35k. The typical two-post lift that's in every bay is like $3000. The various dealer service tools (several-generation-old toughbooks with a 500% markup) are also in that ballpark. Then you've got various flush and fill machines, refrigerant recovery and vacuum, etc, in the $1-2k range each. And then there's a whole menagerie of special little jigs and thingamabobs that're probably each in the $20-200 range, but which save a lot of scraped knuckles and swearing and such. If you head to a performance tuning shop, you might find a 4-wheel chassis dyno worth about $50k or maybe more, but dealerships don't have those.

belltaco 4y ago

Aren't there laws in the US that prohibit car companies from owning dealerships?

ceejayoz 4y ago
Yes, in many states. The buyouts would be an incentive to sell the business to a new owner, not for GM to directly run the dealership.
sithadmin 4y ago
Yes. This isn't that kind of 'buyout' though. It's a contract buyout for early termination of a franchise agreement. GM gives dealer franchisee money; Franchisee stops selling Buick vehicles.

hbarka 4y ago

The handwriting is on the wall. Ford just had a great quarter with their EV lineup. The F-150 Lightning is sold out in participating dealerships. On average, the Lightning turned inventory in just eight days, the fastest ever for Ford. This is in spite of some dealerships who refuse to sell EVs or were playing dirty with exorbitant markups.

spaceman_2020 4y ago
Does GM have anything in the lineup close to the Lightning? Everyone who drove that couldn’t stop raving about it.
- hbarka 4y ago
  On paper, the Silverado EV truck has specs that match or best the Lightning but we have to wait until 2024, late 2023. https://www.chevrolet.com/electric/silverado-ev https://www.chevrolet.com/electric/silverado-ev
- BuckRogers 4y ago
  The latest revision of the Chevy Bolt is getting strong reviews in the cheaper end of the EV car segment. It may be the best around today in fact if you listen to Sandy Munro, a former Ford engineer that now does teardowns and provides consulting services to industry players. The F150 Lightning is currently indeed very special but it's a limited window of glory. Got to hand it to them for being first alongside Rivian. I'm largely looking at Toyota and possibly GM myself for my next couple vehicles. Toyota for obvious reasons. GM has Super Cruise, which in my opinion is better autonomous driving tech than what Tesla has. Companies are just charging more than I want to spend for the top autonomous driving tech. If I were an old timer with retirement money, I'd already have a vehicle with it. To your original question though, it won't be cheap, but a Silverado EV will offer a High Country trim with Super Cruise. It'll be a nice product. And while quality at GM and Ford has been lacking, and still is compared to Toyota, the EV era is granting them a chance at a big reset. Where they failed in the internal combustion era, they could salvage their reputation with this clean slate. They're just simpler vehicles so less for their bean counting ways and shoddy manufacturing to screw up. Super Cruise has me optimistic for GM as those are the type of things that will be key differentiators going forward.

kodah 4y ago

Personally, I'm very skeptical of these plans atm. I just went to go buy a Toyota Rav 4 Hybrid XSE. I have cash, so purchasing should not be hard - yet there are no Rav 4 Hybrid XSEs available and they're not taking orders due to availability. This applies to all EVs in my area. This was not something I've anticipated and I don't know how they're going to meet demand.

smugma 4y ago
Last month a friend was looking to buy a minivan (3 kids ages 1-3). The dealers either didn't have inventory or were charging $8-10K over MSRP. I suggested he try Cartelligent. They found him a car within 3 days at <$2K over MSRP. It was delivered from a dealer 130 miles away.
- kodah 4y ago
  Unbelievable. I take it this was for a gas car?
  - smugma 4y ago
    Yes. I think he ended up with a Honda Odyssey.
rblatz 4y ago
Just a heads up, cash isn’t king anymore when buying a car. The dealers make considerable money from the finance portion of the transaction.
- 7speter 4y ago
  I’ve been wondering if you could tell the dealer that you’d like to finance and then just pay the loan off in the short term, whether it be immediately or in a matter of months, or if there are normally provisions in car loans that prevent that?
  - I_dev_outdoors 4y ago

throw03172019 4y ago

Does anyone know what the $200k is used for? What kind of upgrades does a dealership need to sell EVs?

aaaaaasss 4y ago
fast solar-powered chargers?
Bilal_io 4y ago
I am just speculating, but at the very least they'd need some indoor and/or outdoor charging stations.
bastawhiz 4y ago
That's a fairly reasonable amount for increasing electrical capacity, laying cable, and installing chargers. You can't just put all your chargers on one circuit, and running a whole dealership means having plenty of available chargers. I'd also expect some of the cost goes towards purchasing tools and equipment for working with a significant volume of EVs. I'd expect some high voltage tools are simply not needed for most ICE vehicles.

FunnyBadger 4y ago

As an engineer, I do NOT believe EVs can ever be viable. The thermodynamics doesn't work. The supply chains do not work for either energy or manufacturing. I will never buy an EV because of the engineering analysis of this.

rblatz 4y ago
TheLoafOfBread 4y ago
I agree, copper appears to be a major problem coming forward.
scythe 4y ago
The... thermodynamics? Surely you're joking? For supply chains see particularly http://en.wikipedia.org/wiki/Simon-Ehrlich_wager http://en.wikipedia.org/wiki/Simon-Ehrlich_wager
WalterBright 4y ago
There was a popular HN article a few days ago that claimed EVs had a drivetrain with 100% efficiency. My replies showing that was absurd were not well received :-) The article turned out to be written by a ski instructor. I emailed her with the math errors in her article, but received no reply. My conclusion is there's a lot of wishful thinking around EVs, although I agree that eventually EVs will be most of the market.
sib 4y ago
Interesting that the two in my garage seem quite real and manage to transport us quite effectively. My brother-in-law with the PhD in physics hasn't yet proven anything wrong with the thermodynamics. 10.0 for viability.
fredoliveira 4y ago
bigbillheck 4y ago
Not sure how well that's supported by the empirical evidence there buddy.

4b11b4 4y ago

GM makes a move to squeeze out as much money as possible before dying