They just don't want to sell the brand's upcoming EVs.
Cadillac plans to go electric by 2025, seeking to reinvent itself as a Tesla rival. The brand's first EV, the 2023 Cadillac Lyriq, was revealed earlier this year and will go on sale in 2022, but not everyone is happy about it. After the Lyriq was announced, Cadillac corporate told its dealer network that they would have to invest up to $200,000 to sell the EV, adding charging stations, new tools, and technician training.
EVs still make up a tiny portion of the United States market, so many dealerships were understandably upset about being forced to invest money to sell them. Cadillac offered dealer owners a buyout that they could take instead of making the upgrades, and according to a new report from Automotive News, many of them have taken the opt-out offer.
Cadillac operated 882 dealerships in the US as of January 1, 2020, including 153 Cadillac-only showrooms without any other General Motors brands. For reference, Cadillac only sells around 150,000 vehicles per year in the US compared with Lexus, which sells around twice as many cars with fewer than 300 showrooms. At its peak before the GM bankruptcy in 2008, Cadillac operated over 1,400 dealerships.
If the reports are accurate, one in five of Cadillac's dealerships will close by the end of 2021. This would cut down the dealer network to around 705 showrooms, which still seems pretty high. The average Cadillac dealer currently sells fewer than 180 vehicles per year compared to BMW and Mercedes, which average around 900.
Most of the franchises that took the opt-out are located in smaller markets where EV adoption is less widespread. The Cadillac dealerships in larger markets with more potential EV customers are more likely to invest the $200,000 to sell the Lyriq. If those showrooms also sell other GM brands like Chevy and GMC, they can offset some of those costs because they will also help sell other EV models like the upcoming Chevrolet Bolt EUV and GMC Hummer.