Tesla did not decide to work without a dealership network for no reason. Electric cars demand a lot less servicing if they are well built and have proper quality control. That makes it difficult for dealers to make a profit with them apart from the sale of new vehicles. That’s just part of Cadillac's reasons to offer all its dealerships the chance to avoid the company’s EV push with compensations of up to $500,000.
The other reason is that Cadillac has been fighting to reduce its dealership network for many years already. Johan de Nysschen tried to do that back in 2016 when he was in charge of the company because he thought Cadillac had “too many dealers,” as Automotive News reminds us. In that sense, the EV transition may come in handy.
It is worth reminding that the dealership business as we know it will change deeply. Polestar presented a sales model that seems to be direct, but that actually relies on dealerships for delivery and servicing. Volkswagen developed a hybrid sales strategy called the agency model. And many more may emerge soon.
Although a strong dealership network is important for combustion-engined cars, that can also be a hassle. Old contracts may allow them not to follow all new directives a manufacturer decides to establish, which creates an inconsistency in the level of servicing the dealership network offers.
Badly comparing, this is why you often get good and crispy McDonald’s fries in some stores and mushy and oily ones in others. Some of these stores have old contracts that do not oblige them to follow quality control rules. If McDonald’s had the chance to take these guys out of business without having to pay a hefty fine, it would.
That is probably not the case for all Cadillac dealers who decide to give up selling its cars, but many may fit the description. Apart from EVs demanding less service time, they will also need to make new investments in equipment and training. We have already reported they will be required to spend at least $200,000 on that.
Healthy and strong dealerships will be more than happy to do that. Those who do not make enough money may well prefer to grab $500,000 or a little less instead of spending at least $200,000.
As Darwin helped people realize, it is not the strongest one that necessarily survives: it is the most adaptable to change. That fits pretty well in this situation with the company’s dealerships: natural selection will have them selling EVs or ceasing to exist.
Source: Automotive News