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> 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

> 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.
  - smugma 4y ago
    Or, 1-2% a year if you spread it over the next 8 years to get ready by 2030.
    - jlarocco 4y ago
      Exactly. This is a perfect use case for a bank loan.
- rozap 4y ago
  Dealers have razor thin margins, like 1-2%. They make it up in...creative ways.
  - smugma 4y ago
    Average dealership makes ~$2M/yr. Their margins are very high. I think you're referring to their margins on the sale of automobiles. Those are like the Big Mac. Their service departments are equivalent to the much higher margin soda.
  - deleted 4y ago
    [deleted]
  - mattbrewsbytes 4y ago
    There’s nothing creative or secret about it, they make the most of their money in the Service department. All the doc fees or loan kickbacks, etc. are the same if its EV or ICE. I think hesitancy by dealerships is in the long term EV’s require much less maintenance and that means their service and profits will be much less.
- WalterBright 4y ago
  Those vehicles are all there on borrowed money, and I'm sure it ain't the full purchase price that's needed.
  - ceejayoz 4y ago
    A company with $2M/year in profit should have no issue getting a $200k loan for improvements they'll be using for the next decade.
    - WalterBright 4y ago
      They may already be maxed out on their line of credit. Companies aren't fools and they take advantage of leverage (borrowing) to maximize their profits.
      - ceejayoz 4y ago
        If you're going to assert the average car dealership's $2M of annual net profit can't handle a $200k capital expense that can be amortized over a decade or more, you're gonna have to gimme a bit more than "maybe they're out of credit".
        WalterBright 4y ago
        Obviously the dealer or his creditors don't think he can handle it. They know their business far better than you or I. It's doubtful they'd be foolish enough to pass up a sure thing.
- whaleofatw2022 4y ago
  Most dealers have their Floorplan financed, i.e. FMCC for Ford/Lincoln, NMAC for Nissan, as well as other independent players

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.
- smugma 4y ago
  Or, 1-2% a year if you spread it over the next 8 years to get ready by 2030.
  - jlarocco 4y ago
    Exactly. This is a perfect use case for a bank loan.
rozap 4y ago
Dealers have razor thin margins, like 1-2%. They make it up in...creative ways.
- smugma 4y ago
  Average dealership makes ~$2M/yr. Their margins are very high. I think you're referring to their margins on the sale of automobiles. Those are like the Big Mac. Their service departments are equivalent to the much higher margin soda.
- deleted 4y ago
  [deleted]
- mattbrewsbytes 4y ago
  There’s nothing creative or secret about it, they make the most of their money in the Service department. All the doc fees or loan kickbacks, etc. are the same if its EV or ICE. I think hesitancy by dealerships is in the long term EV’s require much less maintenance and that means their service and profits will be much less.
WalterBright 4y ago
Those vehicles are all there on borrowed money, and I'm sure it ain't the full purchase price that's needed.
- ceejayoz 4y ago
  A company with $2M/year in profit should have no issue getting a $200k loan for improvements they'll be using for the next decade.
  - WalterBright 4y ago
    They may already be maxed out on their line of credit. Companies aren't fools and they take advantage of leverage (borrowing) to maximize their profits.
    - ceejayoz 4y ago
      If you're going to assert the average car dealership's $2M of annual net profit can't handle a $200k capital expense that can be amortized over a decade or more, you're gonna have to gimme a bit more than "maybe they're out of credit".
      - WalterBright 4y ago
        Obviously the dealer or his creditors don't think he can handle it. They know their business far better than you or I. It's doubtful they'd be foolish enough to pass up a sure thing.
whaleofatw2022 4y ago
Most dealers have their Floorplan financed, i.e. FMCC for Ford/Lincoln, NMAC for Nissan, as well as other independent players