DCG Featured: Some Dealers Bail on Cadillac, but Others Go All-in for EV Future
Some dealers bail on Cadillac, but others go all-in for EV future
The brand is entering new luxury markets and reestablishing itself in crucial areas it had ceded to rivals after a chunk of its U.S. dealership network decided to walk away.
This article was originally published on Automotive News. Read the original article linked here.
DETROIT — As one fifth of Cadillac’s U.S. dealers walk away from their franchises, the luxury brand is expanding its reach with the help of retailers who are bullish about its transition to a fully electric lineup.
Cadillac is entering new luxury markets and reestablishing itself in crucial areas it had ceded to rivals — including Beverly Hills, Calif., where it hadn’t been since the 1980s, and its former home base of Manhattan, N.Y., where its only store closed last year. Some established Cadillac dealers are scooping up additional stores, while a few dealers are getting involved with the brand for the first time.
At least eight dealership groups have acquired Cadillac stores this year. Recent deals include acquisitions by Frank Kent Motor Co. and Ken Garff Automotive Group in Texas and by Ciocca Dealerships in Atlantic City, N.J. The purchases show confidence in Cadillac as it implements a plan to sell only electric vehicles by the end of the decade, even with the potential for low volumes to start.
“These are all 20-year decisions,” Mahmoud Samara, vice president of Cadillac North America, told Automotive News. “It is very satisfying to know that you have partners [who] can see 20, 30 years down the road, and they’re putting their money where their mouths are. They’re fully invested into the brand, invested into Cadillac.”
Inder Dosanjh, dealer principal of Dosanjh Family Auto Group in the San Francisco Bay Area, in 2019 was awarded a point near one of his Chevrolet stores in Stevens Creek, a San Jose enclave where Lexus and other luxury brands have high-volume dealerships.
Dosanjh’s Stevens Creek Cadillac replaced a store closed several years earlier by Sonic Automotive and is in the middle of construction to meet the brand’s EV requirements. He expects the new building to be finished by the end of the year.
“Looking at where Cadillac was headed, San Jose is one of the biggest markets in California,” he said. “It was very attractive to have a Cadillac store on Stevens Creek Boulevard. It’s a major car hub.”
When the Cadillac Lyriq goes on sale early next year, Dosanjh, the largest Chevy Bolt EV dealer in the U.S., said he expects to sell every one of the midsize crossovers that he can get.
Even today, Dosanjh says customers are asking to reserve the Lyriq. “I can’t go places where people find out I am the Cadillac dealer,” he said.
Bruce Axelson, dealer principal of Canada-based Capital Automotive Group, won the rights to open Cadillac of Beverly Hills and Cadillac South San Francisco.
“Cadillac has been missing from Beverly Hills for over 35 years. It’s a difficult market. It’s not for anyone,” Samara said. Cadillac wanted to “reestablish that with the right partners.”
He said Cadillac is still working to get a dealership open in Manhattan, after Potamkin Cadillac closed early last year.
As Cadillac introduces more EVs, it needs a physical presence in key markets to engage with luxury buyers, Samara said.
“Customers want to touch and feel your product. It’s an emotional connection they build with your brand,” he said. “Out of sight, out of mind.”
The investments come after about 150 Cadillac dealers accepted buyouts last fall that generally ranged from $300,000 to more than $500,000.
General Motors is requiring retailers that stay with the brand to invest an average of $200,000 on chargers, tooling and training for electric vehicles.
EV interest
While Cadillac’s focus on EVs alienated some longtime dealers, especially in rural areas, interest in the brand by others speaks to their perception of a growing appetite for electric vehicles.
“Dealers are finally seeing the consumer response that electric vehicles [are] becoming more of a request by consumers,” said Dave Cantin, CEO of buy-sell firm Dave Cantin Group.
Decisions to invest in Cadillac are likely based on other factors as well, said Mark Johnson, president of buy-sell firm MD Johnson Inc. Dealers might act on an acquisition opportunity to gain scale or be eager to invest in a new store because the past year has been highly profitable. “Dealers are entrepreneurs, and they’re risk takers,” he said. “For the majority of them, the risk has really worked out.”
For dealer Jimmy Ellis, conversations about a Cadillac point began before an EV-only lineup was on the horizon. One of his stores had Chevy, Buick and GMC, and he wanted to complete the GM portfolio. The transaction was delayed for a variety of reasons, but Jim Ellis Cadillac of Atlanta finally opened last month.
“The timing worked out really well for me because I can see the renaissance of the brand and the direction that they’re going,” said Ellis, president of Jim Ellis Automotive Group in Atlanta.
‘We love the brand’
In Arlington, Texas, Frank Kent Motor Co. is building a $20 million Cadillac dealership to house a franchise it acquired from Group 1 Automotive in January. Frank Kent took a buyout to close a Cadillac store 70 miles away in Corsicana but is eager to grow with the brand in a larger market. The Frank Kent group also has a Cadillac store in Fort Worth.
“We love the brand. We love the manufacturer,” said Will Churchill, one of the group’s owners. “We believe in everything that they’re doing.”
Churchill said he can already sense excitement about the Lyriq among his customers.
“Of all the vehicles that we’ve launched, outside of the Escalade, this one seems to be getting the most positive reception earlier on,” he said. “So it’s exciting to see how that’s going to correlate to sales.”
He’s not completely confident in an all-EV strategy, but Churchill trusts that Cadillac will let consumer interest inform the pace of its rollout. “Is electric going to sell? Absolutely it will. Will it be 100 percent of the portfolio? I don’t think so,” he said. “But if the consumers demand it, then [Cadillac is] prepared to do it.”
