GM gives itself more control over selling EVs

DETROIT — The GMC Hummer will be an extreme, six-figure showpiece of General Motors' electric vehicle prowess. It also will be a test for GM's ability to exert greater control over the dealership sales process in the dawning EV era.

For the next two years, GM will be pulling Hummer dealers' strings, doling out inventory based solely on customer orders and encouraging standardized pricing. The automaker even asserts the right to limit GMC dealers' interactions with Hummer buyers, according to a portion of the brand's "electric models participation agreement" shared with Automotive News by a dealer.

Dealers "can feel the breathing on the back of their necks," said Joe Aboyoun, partner at the Aboyoun-Dobbs law firm in Pine Brook, N.J. "Hopefully that's just part of the startup process. But there is a concern that this is just the beginning of a new methodology that clearly constitutes a violation of the franchise relationship."

In order to sell Hummers, GMC dealers must spend big money — more than $200,000 in some cases — on facility upgrades and training. About half have agreed to do so, even though getting a payoff on that investment could take a while.

At least for the first couple of years, buyers must go to GMC.com to place a reservation, and dealers will receive only the vehicles that customers have ordered that way, rather than the bulk allocations they typically get, according to the participation agreement.

EV customers expect a "seamless, uniform, digital buying experience," the agreement reads.

In October, after the Hummer was unveiled, GM President Mark Reuss told investors that the automaker benefits from the dealership service network that newer, EV-only manufacturers such as Tesla and Rivian lack. But he said the sales model needs to be more efficient.

"We have to get the waste in the system out of it," Reuss said. "That's where we're focused."

Multiple GM executives said Hummers will have set, no-haggle prices, with no discounts or markups allowed. The company hasn't explained to dealers how it will enforce that and how it will avoid the problems that have stymied the industry's previous forays into unilateral pricing, including GM's Saturn experiment in the 1990s.

"We're still working through the details," GMC spokeswoman Michelle Malcho said. "We have no comment at this time."

Most dealers' expectations for digital buying options align with GM's, said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers.

"Post-COVID, we're all looking for the same thing, which is a seamless, online, remote, digital customer experience," he told Automotive News.

The digital buying process can start either with the dealership or the automaker, as long as the dealership delivers the vehicle and is able to establish a relationship with the customer, Appleton said. Dealers "aren't looking to slow that [sales] process. We're on the same page with the automakers there," he said.

GMC filled all available slots for the 2022 Hummer within 10 minutes of the pickup's October unveiling, Duncan Aldred, vice president of global Buick and GMC, said at the time. GMC will build the first-edition model, priced at nearly $113,000, in low volumes starting late next year.

GM expects every 2022 Hummer and some 2023s to be sold through the reservation system, according to a separate letter GMC sent to dealers.

Until late 2022 or 2023, dealers will not receive traditional allocations of Hummers. They can sell the truck only if customers select their store or if GMC selects their store on a customer's behalf. Signing up to sell Hummers and making the required upgrades doesn't guarantee that a dealer will receive any Hummers during the initial reservation phase, the agreement says.

"They want you to invest all that money, and they won't send you any," said a GMC dealer who asked not to be identified. "They're just changing the game here."

Eventually, GMC dealers who get into the EV business would get more battery-powered vehicles to sell, including a Hummer SUV and a full-size pickup, according to an investor presentation by executives last week.

GM currently has just one EV in the U.S., the Chevrolet Bolt, but it intends to offer at least 20 EV models in North America and 30 globally by 2025. The company has committed $27 billion toward battery-powered and autonomous vehicles over that period, so much of its bottom line will depend on dealers selling EVs at the volumes GM anticipates.

GMC's EV agreement gives the factory more oversight of the digital retailing process than automakers traditionally have had. Dealers who sign it must authorize GM to process online deposits on their behalf and take "any other reasonable, necessary steps" to fulfill the vehicle reservation.

The dealership will still be identified as the merchant on the customer's billing statement, the agreement says.

But the contract restricts dealers from using customer information generated from the reservation for anything beyond that one transaction. The information can be used "solely for the purposes of completing purchase of the reserved vehicle and for no other purpose," the agreement says.

Such a restriction could stop dealers from contacting customers for service and future sales, lawyers and state franchised dealer associations said.

"We're giving away a ton of our control to them," said the GMC dealer who spoke with Automotive News. "It's like they're saying, 'It's not your customer. It's our customer.' "

Dealers also are prohibited from responding to reservation requests with automated messages, the agreement says. All communication must be manual. Most dealers use automation — in the form of mailers, emails and prerecorded messages — to market to customers.

Aldred, Reuss and CEO Mary Barra have said that GMC will use no-haggle pricing for the Hummer, which would eliminate one part of the buying process that many customers detest.

"There will be no incentives. There will be no trickery," Aldred said on an October call with investors. "We are trying to construct a dealer margin in such a fashion that it really is a no-haggle price."

Dealers will receive a set margin as part of the no-haggle plan, Aldred said.

The participation agreement doesn't specifically allow for unilateral pricing, however. It says customers reserve the vehicle with GMC at sticker price, but the final price is negotiated with the dealership at the time of sale.

GM expects the initial low-volume Hummer to be in high demand, and the automaker wants to deter dealers from gouging Hummer buyers, which could hurt customer satisfaction and push customers away from the automaker in the future, said Len Bellavia, founding partner of Bellavia Blatt law firm in Mineola, N.Y.

If GMC provides dealers with a reasonable gross profit per vehicle under a no-haggle model, dealers might go along with it, Bellavia said, "unless they feel it's a precursor of something worse to come down the line. You always have to think about whether this is setting bad precedent."