By now it’s old news that Cadillac (and the GMC Hummer) is going to be at the forefront of GM’s massive commitment to EVs. At a recent investor presentation, GM CEO Mary Barra announced that it was increasing its investment in EVs by $7 billion through 2025, for a total of $27 billion (including autonomous vehicles). Her fighting words are:
“We’re committed to fighting for EV market share until we are number one in North America”
Cadillac will be the division that spearheads that initiative (along with the Hummer), starting with the Lyric (above) whose target sales date has been pushed up nine months to early 2022. And Cadillac envisions eliminating IC vehicles form its line-up by 2030, although that’s not yet etched in lithium.
Not surprisingly, a significant number of Cadillac’s smaller dealers (and there are quite a few of them) are wary about having to commit some $200,000+ in infrastructure, training and other costs to sell EVs. So GM is offering them an early retirement: up to $500k to hand in their franchises.
According to a story in autonews.com, dealers have only until November 30 to decide whether to accept the buyout offers. From that story:
According to dealer lawyers and consultants, dealers who take the buyout can still sell new Cadillacs through 2021, and the brand’s used vehicle auctions through 2024. According to some sources, a number of smaller dealers see this buyout as a god-send, as it represents the equivalent of up to five or ten years’ of profits from selling a few Cadillacs per month. But that doesn’t account for on-going service revenue and profits, so it may well be a difficult decision for some dealers.
Meanwhile, GM plans to introduce no less than 30 EV models by 2025, of which two-thirds will be available in the US from its various brands. The key to profitability from building EVs is GM’s new Ultium batteries, which are reportedly 40% cheaper than the current batteries used in the Chevy Bolt. And GM anticipates further cost reductions.
All of this is a reflection that the real EV revolution is just about to begin (other than at Tesla), as the majors switch from building intrinsically unprofitable “compliance-mobiles” to building EVs which will absolutely need to be profitable, at least over the longer haul. That may take a while, and this is precisely why GM is wisely starting at the most expensive vehicles. The GMC Hummer EV pickup will start at $79,995, but the Edition 1 series will cost $112,595.
The EV pickup field is quickly getting crowded, but there’s no question that the Hummer is relatively well-placed to compete, given its considerable brand equity and unique looks and capabilities.
As to how the rest of GM’s assault on EV dominance goes, it will be highly interesting to watch. I’m sure some long-time GM watchers will wonder if this is 1980 all over again, when GM massively stubbed its toes with the introduction of its new X-Body FWD cars. Time will tell.
If the dealer’s not a true believer in EVs as well as Cadillac, time to take the money and run. My prediction is that GM will do alright with EVs in general but Cadillac isn’t the right path. Part 2 of my prediction is that Cadillac will test the waters with an EV and if it doesn’t take off immediately will go back to ICE after a good chunk of dealers take the buyout, they already seem to be hedging a bit. But the remaining dealers won’t then automatically gain all the volume given up by the bought out dealers and as a result Cadillac will end up with even lower market share.
I agree that lost dealers is going to result in some customers being lost. It is the dealers that are in less densely populated areas that are going to be more likely to go away. That will mean too long of a drive to the next closest dealership for some customers.
75 percent of lost Cadillac buyers will buy a GMC product from the same dealer.
So will there be a new deadly sin tally starting for new-new GM or just adding to the old one?
I kid of course. I’m sure GM will knock it out of the park.
(At least “Electric-Gate” will have a ring to it)
It (making money, success) will all depend on that new and cheaper battery GM is touting. That’s where the cost is with these EV’s.
Not only initial cost, how long will it last, how long to charge it, etc.
This whole thing is so much malarkey. I personally will never buy an electric car, but we’ll see what the market says.
It seems to me that there is plenty of room for both EVs and ICE vehicles in the marketplace. I don’t quite understand the either/or arguments I hear. That each side of the divide would need to justify their product line at the individual product level to the consumer, instead of touting tax breaks and freebies, that would be an improvement, too.
+1
Well said
Plenty of people (most manufacturers) were kicking and screaming about seatbelts, emissions controls, airbags, etc. Time marches on.
Sounds like big hand out but how much did it cost them to set up a dealership?. Sounds a bit like “you’ve made your money so take the offer “. How many dealers are really small?. Caddy were never a mom n pop Gas Station network like some of the 50s n 60s import network right?.
In 2017 Cadillac had 924 dealers across the US. Half of them sold less than 50 cars per year. Not 50, but LESS than 50. So less than one a week. Take the 500k and invest it in something else.
Does that count trucks? Cadillac has been a truck brand in coastal markets longer than Acura has.
Considering Cadillac has a forty year history of getting their only dependable engines from other divisions, maybe switching to motors is the way to go. I feel for the autoworkers who’ve made it this far only to get chopped as part of a five year plan.
Yes, Cadillac branded vehicles, not just “cars”.
The question is how many of those dealers sell only Cadillacs. In my hometown, the long-time Cadillac dealership (owned by the same family since the 1930s) might sell 50 Cadillacs a year, but the dealer also holds a Chevrolet franchise. The dealership probably isn’t too keen to give up those extra sales.
Ours sells Chevrolet, Cadillac and Subaru, out of three separate buildings on the same large parcel. Subaru has the smallest footprint of the three (and was recently expanded!) and I’d guess the largest sales volume although Chevy trucks and fleet sales likely get it at least close. The Cadillac dealer is a bit of an afterthought although I think it has been there a long time judging by the building. Their Suzuki franchise didn’t work out on the other side of the parcel.
My parents live in a college town where the Subaru dealer has gone from being a low profile extra line at the Chrysler dealer to having a separate showroom that is about as big as the combined Honda-Jeep-Ram-Chrysler-Dodge store on the same property.
Cadillac is sold by an operation that also sells GMC, Buick, Lincoln, and Nissan from the same sprawling location. They recently dropped Mitsubishi. There was a time when Pontiac was quite likely their biggest seller.
@ Paulson: Sounds like your parents live in my town, Charlottesville, VA!
Umansky and Colonial.
It is great to see GM trying to be again relevant in auto technology. As for Cadillac, well, it’s dead brand walking and has been for some time. Only the Escalade sells enough to make it worth producing. Everything else is gone to the dogs because it seems that GM doesn’t really know what it wants from Cadillac. Hint: it’s not race car handling and ride.
Going all-in in EVs is about the only way to keep Cadillac alive and its going to be hard to beat Tesla at their game.
for the first three quarters of 2020 sales are aproximately:
escalade 15,000
xt4 15,500
xt5 24,000
xt6 15,500
Buick Electra EV. Nuff said.
Buick Electrica
Whoever sold GM on using the Cadillac brand for their flagship EV must have been planted by Musk. No matter the cost they need a new brand for the Flagship. Cadillac represents history good or bad but not the future. Maybe it’s me but $500k seems rather low to exit a Cadillac dealership. I thought Cadillac always had the highest floor pan costs and changed them more frequently than any other GM brand. So likely lots of debt to be paid off using that $500k. Also, why offer any buyout? Why not let ICE ONLY dealerships wither on the vine for 10 more years then contractually close up shop? Existing dealers who pay the $200k EV cost will always be viewed as just a cosmetic change. Similar to Target stores Canadian disaster of remodeling existing Zeller stores rather than building new Target specific stores. A new building facade will only ever be just that. Tesla has many stores in buildings with mixed commercial usage but you can bet when they start building stand alone dealerships they will reflect state of the art design and technology. Everything about EV’s represents a quantum change from almost all ICE prior business practices. If GM wants to kick everyone’s ass out of the gate then existing ICE dealerships that pay the $200k and embrace EV’s wholeheartedly will need to be demolished or recycled and built anew in five to ten years max. Require unique architecture designed by the most highly regarded architects that looks like it just landed from cyberspace, set’s new LEED standards. You get the idea. All potential customers that walk into a new EV Cadillac dealership to browse, purchase or just BS will not leave without having a mental orgasm previously not thought possible to them and a actual sales friend. Employees that use any of the universally hated traditional dealership tactics shall be censured and required to immediately make it right with those effected to management’s satisfaction even if at cost to the employee.
Recapping my rant:
The $200k Cadillac EV buy-in should be considered pocket change. Any EV dealership planning to sell six figure EV automobiles and take market share from those that currently do better have wealthy investors and lightspeed decision making skills.
Providing an out for Cadillac dealers that don’t want to handle electrics may be one of the smartest things GM has done lately.
Look at the the way things are down in the lower rent district, Chevyland, where EV’s have been around since 2014 in limited areas and since 2017 nationwide. There still are dealers who don’t want to handle them, salesmen who know nothing about the product, and service departments without qualified techs. Add in some parts availability issues and there’s the potential to turn a pair of really nice cars (Spark and Bolt, I have one of each) into deadly sins. I’m not trying to tar all dealers, I’ve had nothing but good experiences with one close to me.
Electrics aren’t for everyone, but for some of us they work incredibly well.
Sell the full line, service what you sell, or get out of the business.
Having an idea about the popularity of electric cars in the flyover west, I can project cities where the former Cadillac dealer will have $500K to invest with his local stock broker: Spearfish, SD; Richfield, UT; Cedar City, UT; Idaho Falls, ID; Great Falls, MT; Scottsbluff, NE; Dickinson, ND.