The Shift to Electric Vehicles Leading to Costly Buyouts for U.S. Auto Dealers
Copenhagen Consensus President Bjorn Lomborg recently discussed the impact of the push towards electric vehicles (EVs) in the United States, highlighting the costly consequences for American auto dealers. General Motors (GM) made headlines as it bought out roughly half of its Buick dealers across the country due to their reluctance to sell electric vehicles, as the automaker aims to transition its vehicles to EVs.
The voluntary buyout program saw about half of GM’s 2,000 Buick dealers accept the offer, with the company revealing that the program remains open for additional dealers to opt for the buyout instead of investing in the EV-related requirements that GM has set for the continuation of selling Buicks. GM has set a goal for Buick to have 100% electric vehicles by 2030 and is requiring dealers to make substantial investments in facilities and staff training to support the transition to EVs.
A spokesperson for GM stated, “Buick is transforming, launching the best vehicles the brand has ever had and is the fastest-growing mainstream brand in 2023. This all needs to be supported by the best customer experience in the transition to EVs.”
Last year, GM began offering buyouts to its Buick dealers after requiring them to invest at least $300,000 to facilitate the sale and service of electric vehicles or give up the Buick franchise. This move came after GM’s announcement of the goal to transition Buick to be 100% electric by 2030.
Despite the buyouts, GM noted that Buick sales have increased by nearly 60% this year, despite reducing the number of dealer points by 47%. The company emphasized that nearly 90% of the U.S. population lives within a 25-mile radius of a Buick dealer, ensuring continued accessibility to parts and service for customers.
Dealers who accepted the buyout will no longer sell Buick vehicles but can continue to sell vehicles from other brands under the GM umbrella, such as Chevrolet or GMC. GM has also previously carried out a buyout program for Cadillac dealers, reducing the number of dealerships in the brand’s network by about one-third.
However, some auto dealers have been hesitant to fully embrace the EV push. Over 3,000 dealers recently sent an open letter to President Joe Biden, urging him to “tap the brakes” on EV mandates due to relatively soft demand for EVs at present. The letter highlighted the challenges of matching current regulations with consumer demand for battery electric vehicles.
As the shift to electric vehicles continues to gain momentum, the impact on both auto dealers and consumers remains a topic of concern. With the automotive industry rapidly transitioning to EVs, the implications for dealers and the market as a whole are likely to continue evolving in the coming years.