By NICHOLAS SAKELARIS | CoServ
There’s a reason Elon Musk started selling Teslas directly to the public nearly a decade ago rather than go the traditional franchise dealership route.
He wanted his own employees who have bought into his mission for electric vehicles doing the selling. They’re also experts in all the nuances of EVs.
He knows that not all car dealerships and salespeople will be enthusiastic about electric vehicles because they disrupt the status quo.
Elon’s concern about the traditional franchise dealerships is coming to fruition now as Cadillac prepares to launch the Lyriq, a sporty crossover SUV that is scheduled to hit the streets in 2022.
The Wall Street Journal reported that Cadillac gave its 880 U.S. dealerships an ultimatum: Spend roughly $200,000 on charging stations and other equipment upgrades for EVs or accept a buyout offer to stop selling Cadillacs.
About 150 dealerships have decided to dump the Cadillac brand rather than make the costly upgrades, people familiar with the plans told The Wall Street Journal.
Cadillac confirmed that some dealerships accepted buyouts but declined to say how many did that.
Granted, these dealerships sell other brands and they do get money from Cadillac as part of the buyout. And they could always come back in the future.
“The future dealer requirements are a logical and necessary next step on our path towards electrification,” Cadillac Global Brand Chief Rory Harvey said.
Regardless, this spat over going electric underscores that many people don’t believe the electric revolution will succeed or that consumers even want them. Similar arguments will be coming for other traditional automakers, including Ford, as it launches the Mustang Mach-E this month.
Selling electric vehicles isn’t easy. The salesperson has to convince consumers not only to buy an electric charging unit but to also have expensive wiring installed in the garage. Altogether, that can add more than $1,000 to the cost of the vehicle. They also must answer questions about battery life and range anxiety.
Dealerships also make their money from repairs, which there are less of because EVs don’t have as many parts or fluids as ICE (internal combustion engine) vehicles to worry about.
“The way dealers make money selling electric will be different than selling combustion-engine vehicles,” said Erin Kerrigan, who runs an advisory firm that helps dealerships sell their businesses. “There will be an opportunity for [auto makers] to rethink their franchise models.”
In other words, there will be a paradigm shift and many people just aren’t ready for it.
In other Elon news, the billionaire CEO of Tesla finally confirmed that he has moved to Texas just weeks after becoming the world’s second-richest man. The move puts Elon closer to two of his biggest projects: The Tesla Gigafactory near Austin (served by Bluebonnet Electric Cooperative) and Space X near Brownsville.
The Houston Chronicle said he has a net worth of $157 billion, mostly from stock gains from the 700 percent increase in Tesla stock over the past year.
California collects capital gains if Elon sells his stock, something Texas doesn't do. While he'd still have to pay federal capital gains, he won't have to pay any to the state, potentially saving billions of dollars. Not to mention the savings with no state income tax in Texas versus California.
The article also highlights lower gasoline prices in Texas compared to California. When you're talking about Elon, though, it's probably more relevant to point out the fact that Texas has lower electricity rates than California rather than gasoline prices.