Almost 20% of Cadillac dealers have opted to accept buyouts from General Motors Company (GM) - Get General Motors Company Report rather than pay for costly upgrades needed to service and sell electric vehicles, according to a published report Friday.
The move will reduce Cadillac’s U.S. dealership count by about 150 outlets, The Wall Street Journal reported, citing people familiar with the plans.
Dealerships were offered from $300,000 to more than $1 million to exit the brand if they were unwilling to spend about $200,000 on upgrades for charging stations and repair tools, according to the report.
Most of the dealers giving up the Cadillac brand sell other GM lines such as Chevrolet and GMC, according to the report.
Electric vehicles still account for only 2% of U.S. vehicle sales, according to the report.
But shares of companies making and selling electric cars and trucks have taken off this year, led by Tesla Inc.’s (TSLA) - Get Tesla Inc Report extraordinary stock performance. Tesla’s market cap now exceeds that of most traditional U.S. automakers combined. And the company’s shares are being added to the S&P 500 index on Dec. 21. Other electric-only competitors, including Nio (NIO) - Get NIO Inc. (China) Report, have seen their stocks surge as well.
Tesla sells its cars online without a dedicated dealer network. And because electric cars have fewer parts, the profitable parts-and-service units of many dealerships face challenges as more electric vehicles hit the road.
GM’s first electric vehicle isn’t expected until 2022.
Shares of GM rose 1 cent to $44.39 in after-hours trading Friday. Tesla shares fell 4 cents to $599 in after-hours trading.