Report: Cadillac's EV Ambitions Creating Dealer Shakeup

Cadillac’s instance that it be the first brand owned by General Motors to go entirely electric has resulted in a shrinking U.S. dealership network, though perhaps a healthier bottom line for GM in the long run. It may also foreshadow the trajectory of other brands committed themselves to EVs and give us a sense of what the dealer landscape might look like in a decade or two.

Over the last few years, American luxury brands have been attempting to grow in select markets they believe will bring in new, affluent customers by building experience centers that mimic high-end airport lounges. Cadillac even briefly moved its base of operations to New York City as a way to gain distance from its rustbelt background and ingratiate itself into high society. More recently, Lincoln introduced a Central Park-themed Navigator as both have been trying to lay down roots in parts of California after ceding a large share of the market to the competition decades earlier. But GM’s insistence that Cadillac become an all-electric brand (with Lincoln also targeting a glut of EV sales by 2026) seems as though it could create complications, even if the end result is a major victory.

According to Automotive News, Cadillac is losing stores in rural regions. Owners are concerned that the swift shift toward EVs won’t work for a customer base that has to cover more ground on a daily basis and lack access to robust charging networks. But the company’s strategy is apparently working for the metropolitan hubs it’s been focusing on.

From AN:

Cadillac is entering new luxury markets and reestablishing itself in crucial areas it had ceded to rivals — including Beverly Hills, Calif., where it hadn’t been since the 1980s, and its former home base of Manhattan, N.Y., where its only store closed last year. Some established Cadillac dealers are scooping up additional stores, while a few dealers are getting involved with the brand for the first time.

At least eight dealership groups have acquired Cadillac stores this year. Recent deals include acquisitions by Frank Kent Motor Co. and Ken Garff Automotive Group in Texas and by Ciocca Dealerships in Atlantic City, N.J. The purchases show confidence in Cadillac as it implements a plan to sell only electric vehicles by the end of the decade, even with the potential for low volumes to start.

“These are all 20-year decisions,” Mahmoud Samara, vice president of Cadillac North America, told Automotive News. “It is very satisfying to know that you have partners [who] can see 20, 30 years down the road, and they’re putting their money where their mouths are. They’re fully invested into the brand, invested into Cadillac.”

But thinking 20 years down the line ourselves makes us wonder what the dealership landscape will ultimately look like. The presumption is that EVs will be at least as capable as internal-combustion vehicles by 2040 and it’s one we’re inclined to agree with — provided the necessary action is taken to expand charging infrastructures and the additional strain to be placed on power grids. But that may also result in an interim period where electrics dominate urban landscapes as gas or diesel models remain king in rural environments. Brands pursuing universal electrification would effectively be splitting the market.

Then there are the associated costs with upgrading dealerships to adhere to the new EV strategy. General Motors is requiring retailers that wish to stay with the brand to invest an average of $200,000 on chargers, tooling, and staff training for electric vehicles — all of which are absolutely necessary if they’re to service and sell EVs.

This isn’t new, Cadillac’s previous dealer strategy ( Project Pinnacle) required loads of mandatory investments and was broadly unpopular among auto dealers. A lot of owners simply allowed themselves to be bought out. This time around stores literally have to invest if they’ve any hope of selling or servicing future vehicle lineups, however, with Automotive News reporting around 150 Cadillac dealers having accepted buyouts last fall. Prices were said to average between $300,000 and more than $500,000.

While that makes it sound like the current strategy is on track to be another debacle, Cadillac remains committed to retaking ground in metropolitan hubs and believes the market is coming around to electric cars. The same goes for dealers, some of whom are investing millions to retake facilities that went under (or allowed themselves to be bought out) over the last few years.

“The timing worked out really well for me because I can see the renaissance of the brand and the direction that they’re going,” said Jimmy Ellis, president of Jim Ellis Automotive Group in Atlanta.

His group already sold Chevy, Buick, and GMC products. But he said he only wanted to grab onto Cadillac after it had made a formal commitment to swap to EVs and introduced the new Lyriq crossover. He’s hardly alone in holding that opinion but there are reasons to be wary, as electric adoption remains in its infancy. Then again, if one could get in on the ground floor and be the only game in town as interest begins to swell, that would provide a decided sales advantage.

“Dealers are entrepreneurs, and they’re risk takers,” said Mark Johnson, president of buy-sell firm MD Johnson Inc. “For the majority of them, the risk has really worked out.”

We’ll have to see if these successful acquisitions translate into healthy sales. But those throwing their hat into the ring with Cadillac’s new strategy appear overwhelmingly optimistic as the doubters are forced to abandon ship.

[Image: Lerner Vadim/Shutterstock]