GM offers to buy out Buick dealers that don't want to invest in EVs | Hacker News Reader

GM offers to buy out Buick dealers that don't want to invest in EVs

cnbc.com

29 pointssmugma65 comments

The handwriting is on the wall. Ford just had a great quarter with their EV lineup. The F-150 Lightning is sold out in participating dealerships. On average, the Lightning turned inventory in just eight days, the fastest ever for Ford. This is in spite of some dealerships who refuse to sell EVs or were playing dirty with exorbitant markups.

Does GM have anything in the lineup close to the Lightning? Everyone who drove that couldn’t stop raving about it.

On paper, the Silverado EV truck has specs that match or best the Lightning but we have to wait until 2024, late 2023. https://www.chevrolet.com/electric/silverado-ev

The latest revision of the Chevy Bolt is getting strong reviews in the cheaper end of the EV car segment. It may be the best around today in fact if you listen to Sandy Munro, a former Ford engineer that now does teardowns and provides consulting services to industry players.

The F150 Lightning is currently indeed very special but it's a limited window of glory. Got to hand it to them for being first alongside Rivian. I'm largely looking at Toyota and possibly GM myself for my next couple vehicles. Toyota for obvious reasons. GM has Super Cruise, which in my opinion is better autonomous driving tech than what Tesla has. Companies are just charging more than I want to spend for the top autonomous driving tech. If I were an old timer with retirement money, I'd already have a vehicle with it.

To your original question though, it won't be cheap, but a Silverado EV will offer a High Country trim with Super Cruise. It'll be a nice product.

And while quality at GM and Ford has been lacking, and still is compared to Toyota, the EV era is granting them a chance at a big reset. Where they failed in the internal combustion era, they could salvage their reputation with this clean slate. They're just simpler vehicles so less for their bean counting ways and shoddy manufacturing to screw up. Super Cruise has me optimistic for GM as those are the type of things that will be key differentiators going forward.

> 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.

$200k sounds like a minuscule amount of capital for a business with hundreds of $40-50k vehicles on hand.

To be fair, the profit margins for dealerships on those vehicles are more like single-digit thousands.

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.

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.

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.

Or, 1-2% a year if you spread it over the next 8 years to get ready by 2030.

Exactly. This is a perfect use case for a bank loan.

Dealers have razor thin margins, like 1-2%. They make it up in...creative ways.

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.

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.

Those vehicles are all there on borrowed money, and I'm sure it ain't the full purchase price that's needed.

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.

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.

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".

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.

Most dealers have their Floorplan financed, i.e. FMCC for Ford/Lincoln, NMAC for Nissan, as well as other independent players

Personally, I'm very skeptical of these plans atm. I just went to go buy a Toyota Rav 4 Hybrid XSE. I have cash, so purchasing should not be hard - yet there are no Rav 4 Hybrid XSEs available and they're not taking orders due to availability. This applies to all EVs in my area. This was not something I've anticipated and I don't know how they're going to meet demand.

Last month a friend was looking to buy a minivan (3 kids ages 1-3). The dealers either didn't have inventory or were charging $8-10K over MSRP. I suggested he try Cartelligent. They found him a car within 3 days at <$2K over MSRP. It was delivered from a dealer 130 miles away.

Unbelievable. I take it this was for a gas car?

Yes. I think he ended up with a Honda Odyssey.

Just a heads up, cash isn’t king anymore when buying a car. The dealers make considerable money from the finance portion of the transaction.

I’ve been wondering if you could tell the dealer that you’d like to finance and then just pay the loan off in the short term, whether it be immediately or in a matter of months, or if there are normally provisions in car loans that prevent that?

Read the contract, mine didn't have it though (2020).

Prepayment penalties are rare outside of subprime/pay-and-go loans. When I worked at Ford Credit the max dealer markup on financing was 2%, and the dealer got their commission on the rate markup up front. Taking a crappy interest rate and prepaying is a sound negotiation tactic because it is the financing company that takes the hit.

Usually not. I've once financed a car just to get an additional rebate (few extra grands to finance through manufacturer) and paid it off next month.

I’ve done this. They asked me to leave the loan outstanding for two months and I ran the numbers on the interest that would accrue. They agreed to deduct that amount (several hundred dollars) from the purchase price.

Of course, this was pre-supply chain crunch, so now you’d probably be best off not saying you’d prepay and just doing it ASAP

Thanks for the heads up and the subsequent discussion.

Good, it's been a while I wanted to get my hand on someone who actually want to buy such big cars. What is it with the trend for huge cars? Why do people have to negate EVs energy efficiency story pushing around much more weight than (what to used to be) a normal sized car. Haven't you heard of climate change? At least buy an Aptera for chrissake. Well anyways, we're doomed of we keep on the car lifestyle.

RAV 4 is not a big car.

It's bigger than most cars you'd find in most of the world. Where's your threshold for "big"?

Most cars in the US are bigger than most cars you'd find in most of the world.

Exactly, and this is related to the question "What is it with the trend for huge cars?", as this trend has largely been an American one.

It's only 5 cm wider and longer than a Honda Civic. It's higher, of course, since it's a "compact crossover", but not as high as Suzuki Jimny, for example.

I mean, in this context I don't think when the word "big" was used it was referring to the surface area from a bird's eye view.

There's many different ways you could think of something as being "big", but in this context I believe either volume, mass or even drag coefficient is what is most relevant to the thread.

Fiat 500L: Cx ~ 0.36, weight ~ 1300 kg

RAV4: Cx ~ 0.32, weight ~ 1700 kg

Ford F-150: Cx ~ 0.56, weight: 1900-2500 kg

It's a small car for Americans, and a medium-sized car for Europeans.

It's now the size of a 1st and 2nd generation 4Runner.

> What is it with the trend for huge cars

I need to move next year because the city I live in (San Jose) is utterly unaffordable. Turns out there's a lot of things movers won't take for you including my vaste plant collection. I remember driving with all of my plants, valuables, and dog to San Jose. I had zero space left, yet now I have a long-term partner so I'll need more space for that move.

Second, road trips. I go to a festival every year that's in the boondocks in Michigan. Getting there is no simple task so having a car like the Rav 4 Hybrid that gets excellent mileage and can get me across country~ish terrain is quite nice.

> Why do people have to negate EVs energy efficiency story pushing around much more weight than (what to used to be) a normal sized car.

The Rav4 Hybrid is... a hybrid. I don't know what you're on about. If you're asking why I didn't get a plugin EV it's because I need to haul stuff and EVs perform terribly at this task.

Even if they did exist in a functional capacity I'd be hard pressed to find a place where I can quickly charge it. The housing crisis out here makes it difficult for me to buy a home, road trips would be a lot more inconvenient (I like to go to festivals, so they're long road trips.)

Last but not least is cost. The Ford Lightning looked attractive to me, but then I found out as soon as you haul anything the battery basically pits.

> Haven't you heard of climate change?

Weird question, but yes. I used to be an executive at a water startup.

> At least buy an Aptera for chrissak

This is it? https://aptera.us/ That would not solve my problem. Looks like they're reservation only. Looks like they're also having trouble sourcing parts, like Toyota: https://aptera.us/community/discussion/realistic-delivery-ti...

Personally, this reply wreaks of classism and doomerism. I don't know why this kind of take is so popular on HackerNews but I think y'all really need to think about the image you're selling to the rest of this forum and furthermore the image you're selling to people when you open your mouth and speak so shittily to people. This is especially true when you don't even commit one iota of your brainpiece to understanding my usecase before loudly complaining mixed with misplaced outrage and shaming.

Last edit: You have inspired me to start working on a website to combat doomerism and encourage people to seek help.

Aren't there laws in the US that prohibit car companies from owning dealerships?

Yes, in many states. The buyouts would be an incentive to sell the business to a new owner, not for GM to directly run the dealership.

Yes.

This isn't that kind of 'buyout' though. It's a contract buyout for early termination of a franchise agreement. GM gives dealer franchisee money; Franchisee stops selling Buick vehicles.

Does anyone know what the $200k is used for? What kind of upgrades does a dealership need to sell EVs?

fast solar-powered chargers?

I am just speculating, but at the very least they'd need some indoor and/or outdoor charging stations.

That's a fairly reasonable amount for increasing electrical capacity, laying cable, and installing chargers. You can't just put all your chargers on one circuit, and running a whole dealership means having plenty of available chargers.

I'd also expect some of the cost goes towards purchasing tools and equipment for working with a significant volume of EVs. I'd expect some high voltage tools are simply not needed for most ICE vehicles.

I thought the Buick brand was dead. Zombie?

Is this part of a plan to shrink footprint or transition to DTC?

> transition to DTC?

I see it as being less about selling direct to consumers and more about building an EV brand with a strong service story. Right now, there is a perception that Tesla ships cars with superior technology, offers a superior charging network, but against that consumers feel Tesla has poor build quality and problems servicing its vehicles.

(This may be all or only partially true, but from a marketing perspective, what matters is whether customers perceive that these things are true, and the claim here is that they do.)

GM has to play catch-up with tech, and is doing its best with stuff like Super-cruise: https://www.gmc.com/connectivity-technology/super-cruise

But until Tesla gets its quality and service act together, brands with dealership networks like GM can differentiate themselves with their dealer network, which is also a service network... Provided the dealers invest in the tech and training to sell and service EVs.

Differentiating their products with "You can get it serviced quickly at your local Buick dealership" is not going to work if there's an asterisk and fine print that says "participating dealers only." So they're getting rid of the dealers who undercut an important part of their value proposition.

Will it work? :shrug: But this appears to be what they are attempting to do by dropping dealers who won't service EVs.

---

Elsewhere, Volvo is trying to have it both ways! Their Polestar brand is sold DTC, but serviced at Volvo dealerships. That avoids the negative perception of buying from dealers who add on ridiculous charges or markups, but allows them to promise Polestar buyers that service is readily available.

TL;DR

Though not actually at all Volvo dealerships. A friend of mine regularly had to go for quite a long drive to a specific Volvo dealership to get his Polestar fixed. And there were quite a few trips.

I did not know that Polestar service is optional with Volvo dealerships!

Maybe that's exactly what GM does not want to happen with Cadillac and Buick EVs.

Yes, I think that's precisely the motivation. My friend was not thrilled about the combination of super buggy behavior and long drives for software updates that he should have been able to apply himself via removable storage.

This is where Tesla’s lack of a PR department will eventually bite them. They should be actively marketing their service and quality rather than trying to sue criticism out of existence. The market won’t buy everything they put out forever.

> actively marketing their ... quality

I'm reminded of a certain idiom about a thing you can't polish.

No, they got rid of Oldsmobile and Pontiac. Buick is not a popular brand in the US, but it was retained because (at least at the time) it was doing well in China.

As an engineer, I do NOT believe EVs can ever be viable. The thermodynamics doesn't work. The supply chains do not work for either energy or manufacturing.

I will never buy an EV because of the engineering analysis of this.

I agree, copper appears to be a major problem coming forward.

The... thermodynamics? Surely you're joking?

For supply chains see particularly http://en.wikipedia.org/wiki/Simon-Ehrlich_wager

There was a popular HN article a few days ago that claimed EVs had a drivetrain with 100% efficiency. My replies showing that was absurd were not well received :-)

The article turned out to be written by a ski instructor. I emailed her with the math errors in her article, but received no reply.

My conclusion is there's a lot of wishful thinking around EVs, although I agree that eventually EVs will be most of the market.

Interesting that the two in my garage seem quite real and manage to transport us quite effectively. My brother-in-law with the PhD in physics hasn't yet proven anything wrong with the thermodynamics.

10.0 for viability.

Not sure how well that's supported by the empirical evidence there buddy.

Why not offer a financing facility? Surely a company the size of GM could negotiate low or no interest financing for dealers on the order of $400mm.

GM makes a move to squeeze out as much money as possible before dying

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