Nearly half of Buick dealers are accepting a takeover offer from General Motors Co. as industry stakeholders grapple with a rocky transition to electric vehicles.
Buick, GM's oldest brand and the only brand not to offer an electric vehicle, said this week it had reduced its dealer count by 47% after offering the buyout program in 2022, when it was 2,000 US dealer had. A similar program at Cadillac reduced the luxury brand's dealer count nationwide by a few hundred franchises. GM's flagship GMC brand and mass-market Chevrolet brand did not offer a buyout program to their dealers.
GM and its competitors have asked their dealers to join them in the transition to electric vehicles by investing in training, charging infrastructure and equipment in preparation for selling more battery-powered vehicles. But even as electric vehicle sales continue to hit records, they are growing more slowly than expected: Too few charging stations, high prices and charging speeds slower than the time it takes to fill a tank of gas have contributed to consumers' hesitancy to Buying an electric car is the leap into full electric vehicles.
As a result, automakers have delayed electric vehicle launches, cut investment plans, downsized battery factories under construction and allowed development programs to fail. They have also reduced and delayed requirements for their dealers to meet certain standards, including the number of charging stations available, in order to be certified to sell electric vehicles.
The EV offering for dealers is currently clouding over: Dealer prospects for selling electric vehicles are now worse than they were a year ago, according to a new dealer sentiment study from Cox Automotive Inc., an automotive services provider.
“The excitement that was around electric vehicles a year ago has definitely faded,” Jonathan Smoke, chief economist at Cox Automotive, said in a statement. “Although electric vehicle sales are increasing, supply is growing faster. The transition to electric vehicles requires more effort from dealers than before, so it makes sense that enthusiasm has waned.”
For the study, dealers told Cox that they are “concerned about selling electric vehicles and how they are going to sell them and how they are going to make money from them. “So it's not surprising that so many dealers have decided to take over since it's uncharted territory,” said Michelle Krebs, executive analyst at Cox Automotive.
Cox said electric vehicle sales accounted for 7.9% of total industry revenue in the third quarter, a record that rose from 6.1% a year ago and 7.2% in the second quarter. Higher EV inventories, more product availability and downward pricing pressure are helping EV sales continue to grow. They have gained 13 quarters in a row. In 2020, electric vehicle sales in the US topped 250,000 for the first time.
More: Can electricity power Buick again?
Change of dealer at Buick and Cadillac
Buick is the Detroit automaker's second brand, following Cadillac, to transition to an all-electric future. The Cadillac brand also went through a dealer buyout program. About 880 franchises under the Cadillac umbrella were required to invest at least $200,000 each to sell electric vehicles starting this year. Hundreds of retailers chose to take over instead.
In 2022, Buick unveiled the Wildcat concept vehicle to preview its future all-electric lineup. Buick is reviving its Electra name for its electric vehicles. The brand is set to begin its transition to electric vehicles in the US with a new model in 2024. Buick – which is most successful in China – does not yet have any electric vehicles on the market in the United States. The focus remains on being fully electric by 2030.
According to the automaker's financial filings, Buick's acquisition program cost GM about $1 billion in the third quarter of this year.
In a statement about the buyout program, Buick spokesman Sean Poppitt said the brand is “transforming, bringing to market the best vehicles the brand has ever had and will be the fastest-growing mainstream brand in 2023.” This all needs to be supported by the best customer experience in the transition to electric vehicles. As previously mentioned, this year we gave dealers who disagree with Buick’s future the option to voluntarily exit in a respectful and structured manner, with the full support of our National Dealer Council.”
Bo Mandal, chairman of the Buick-GMC National Dealer Council and owner of a Buick/GMC dealership in Biloxi, Mississippi, said the buyout process with Buick dealers was conducted in collaboration with the council.
“We felt like there were a lot of dealers who wanted to focus on their Buick business, and we felt like there were a lot of dealers who didn't, and we wanted to help the dealers who didn't. “give an opportunity to get out of this business,” Mandal said, pointing out that a key reason for retailers to take over was because they had other brands that they would focus more on.
According to the brand, the dealers that accepted the acquisition represented just over 20% of Buick's average annual volume. The automaker declined to say how much it offered dealers as part of the buyout program.
“We have been here for two years. I had no complaints, that’s incredible,” Mandal said. “And that just shows you that other OEMs that try to do this in the future should take a page from Buick's playbook because it's truly done in partnership.”
Mandal has invested in the future of Buick's electric vehicles by installing chargers and modernizing infrastructure. He said: “We know this will be necessary in the future.”
Buick's sales of internal combustion engine products increased 63% for the year. The Envista, the brand's newest addition, has been a shining star for Buick. The small SUV hit dealers this summer with a price tag of $23,495.
Mandal called the Envista “the most groundbreaking, groundbreaking Buick product we've had in a long time.” I'm optimistic about the future and it's an important part of the GM brand. It is an important part of their composition.”
Chevrolet, GM's volume brand, has 2,900 dealers. The brand sold 1.3 million vehicles this year, compared to Buick's 124,868.
Chevrolet spokesman Chad Lyons said 86% of the entire Chevrolet dealer network has signed up as EV dealers for the brand. This means they have met all electric vehicle requirements, including installing and operating electric vehicle chargers at their facility, have service equipment and tools, and have provided training.
Stellantis and Ford dealer transition
Meanwhile, GM's crosstown rivals have rolled out certification programs for their dealers to sell electric vehicles. About two-thirds of Ford Motor Co.'s U.S. dealers opted into the voluntary Model e certification program last year. Participation has now stabilized at about half of the dealer population – about 1,550 dealers have signed up, up from 1,920.
“This enrollment level,” spokesman Marty Guensberg said in an email, “means 86% of the population is within 20 miles of a Ford dealer capable of selling and servicing a Ford electric vehicle .”
Last month, Ford lowered its requirements for certification. That includes fewer training requirements and fewer on-site chargers as the automaker withdraws its $12 billion electric vehicle investment plans. The Dearborn automaker cited delays in the charger supply chain and infrastructure due to changing requirements.
The program has also faced litigation from several dealers: The Illinois Motor Vehicle Review Board ruled last month in favor of 26 retailers who challenged the legality of the requirements, a decision that Ford has said it will appeal.
Now Ford dealers must have two Level 2 chargers by June 30, up from the previous five. To receive the “Elite” certification, which most retailers have opted for, stores must have three of these chargers instead of five. The additional requirement to have a Level 3 charger from 2026 has also been deleted. Without certification, dealers can continue to sell internal combustion engine and hybrid products. The original withdrawals had required traders to invest about $500,000 for certification and up to $1.2 million for elite.
Stellantis NV is bringing its first all-electric vehicles to the North American retail market next year. In 2022, the goal is to complete the infrastructure of all more than 2,600 US dealers for EV certification by the end of the first quarter of 2024.
In a recent statement, Phil Langley, head of network development in North America at Stellantis, said the company is setting a deadline of March 31 for ordering equipment and selecting an installer.
“We are aware of some supply chain issues with chargers and power grid challenges,” he said. “We anticipate that these smaller, more rural areas will require a little more time, and we have built flexibility into the plan to meet that challenge.” We will be up and running with electric vehicle dealer certification shortly after the start of the year “We expect this process to continue until the end of the second quarter of 2024.”
Charging infrastructure requirements are based on expected volume sales of electric vehicles, but include a Level 3 DC fast charger. Certification also includes specialized tools, personal protective equipment and training. Without certification, the products retailers can offer are limited.
“We will not ensure that the entire dealership is fully ready on April 1st. “That's not going to happen,” Nyle Maxwell, CEO of the four-member Nyle Maxwell family of dealers in Texas and chairman of the Stellantis National Dealer Council, told The Detroit News last month about the initially announced first-quarter deadline. “For Level 3 chargers, some energy suppliers cannot provide us with the required voltage.”
Fluid discussions are ongoing with Langley and Stellantis dealer network officials, Maxwell said. Utilities are struggling to have enough workers and qualified electricians to install the voltage required for fast chargers.
Maxwell says his dealers have chargers. However, sellers in more rural areas are not anticipating the demand for electric vehicles seen in larger metropolitan areas, and with some forecasts suggesting new technology could make Level 3 chargers more affordable in the next two years, some may want to wait .
“We’re going to be at the mercy of the availability of these charging stations,” Maxwell said of electric vehicle demand. “Not everyone is going to pay $1,000 for a Level 2 charger because they can conveniently have it in their garage. The acceptance and marketability of these products will depend on many things. Can I feel safe buying this all-electric vehicle? Won’t I get stuck somewhere?”
Additionally, electric vehicles are more expensive than their engine-powered counterparts. The knowledge of an important presidential election next year also adds to the uncertainty. Leading Republican candidates say they would roll back tougher emissions standards proposed under the Biden administration.
“There is still a lot of room for improvement,” said Maxwell.
Kevin Farrish, dealer principal of a Stellantis dealer in Fairfax, Va., and vice chairman of the council, said he believes Stellantis' requirements are reasonable and that company leaders are willing to work with retailers. For example, dealers have the option of renting a forklift for use in their service department instead of owning one.
“My gut feeling is that they are pushing harder for dealers in major cities to have electric vehicles for sale,” Farrish said. “That’s where most of the sales will come from, which makes sense. Beyond that, I’m not aware of any real pressure.”
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