Cadillac’s dealership base in the U.S. is shrinking again. This time nearly one-fifth of the brand’s U.S. stores are opting to part ways with Cadillac. The divorce comes amid Cadillac’s request that dealerships invest in their facilities to accommodate the brand’s electric future.
Earlier this year GM laid out options for Cadillac dealerships to upgrade their facilities. With the rollout GM gave Cadillac stores a choice: they can spend the $200,000 to upgrade their location or they can request a buy-out from GM. In the latter case, GM gives them a cash offer to terminate their franchise agreement with the brand. Automotive News reports that about 150 of Cadillac’s 880 U.S. dealerships opted to leave the brand.
The report states that cash offers from GM to terminate a franchise agreement have been the range of $300,000 to $500,000. Apparently that is a big enough check for some stores to walk away from Cadillac’s electric future.
Much of the calculus involved in these dealerships’ decisions hinges on volume. Rural stores with low sales volumes may not see a viable future with an all-EV lineup. Battery-electric models tend to require less maintenance, meaning less recurring revenue potential on the service side of the shop. For stores with low sales volume, the economics may no longer make sense.
Despite this reduction, Cadillac is gaining stores in important markets. Cadillac has new dealerships in Manhattan, Beverly Hills and other markets the brand has not had a presence in for some time.
News that 150 Cadillac dealerships are ready to walk away is probably well-received with GM. A smaller dealership base equates to less structural costs for Cadillac and GM. It also allows the brand to build financially-stronger dealerships in metro areas so that they can adequately compete with German luxury brands who also have a lesser footprint in the U.S. For example, Mercedes-Benz has fewer than 400 dealerships in the U.S.
This is also not the first time Cadillac has tried to reduce its dealership count. Back in 2016 the brand rolled out very extensive facilities requirements in an effort to thin out stores who were not 100-percent invested in the brand’s future. This effort has been less intensive in terms of requirements, but appears to be quite effective.
Cadillac’s first battery-electric model, the 2023 Cadillac Lyriq, goes on sale in early 2022.