Will automakers steer EV distribution?

General Motors and Volvo are eyeing changes to their distribution models as they move into the electric vehicle era that would give them a larger role in managing dealerships' inventory.

The plans would help dealers avoid paying to carry a big selection of EVs before demand for them takes off, but some fear the long-term consequences of an automaker-controlled inventory pool.

They're a sign that the industry's rapid push into electrification may have implications that go beyond fuel consumption and emissions, by altering some of the long-accepted fundamentals of how franchised dealerships operate.

Volvo, which aims to go fully electric by 2030, outlined a strategy this year to deliver customer-ordered vehicles to dealerships rather than having retailers order and carry the inventory on their floorplan. Under the new model, dealers can expect to have an inventory of about five to 10 vehicles for test drives and impulse buyers, Volvo Car USA CEO Anders Gustafsson told Automotive News in May.

GM's plan to manage EV inventory for its Chevrolet brand, as the company targets a zero-emission light-duty lineup by 2035, is less drastic. Chevy is considering a pilot of regional hubs for the 2022 Bolt EV and Bolt EUV later this year, likely in California. The pool of nearby inventory likely would supplement vehicles on dealers' lots.

Volvo and Chevy dealers would be able to receive vehicles in a matter of days, as opposed to the weeks it takes them to arrive after being shipped from the factory. The strategies could decrease dealers' floorplan costs and anxiety in low-demand EV markets.

Still, some dealers suspect the model will put them at a disadvantage against competing stores that have a full lineup on hand, and they worry it's a slippery slope from there to the kind of direct-sales model that Tesla uses.

But the automakers say that's not their intent. Volvo's central stock plan is designed to take the "pressure off the network" to discount vehicles to move them off the lot, Volvo Retail Advisory Board Chairman Ernie Norcross said.

"The current system that we have is a push-pull program; the factory pushes us to pull demand," said Norcross, owner of Volvo Cars Memphis in Tennessee. "Now you're focused on a customer-centric model, where you're trying to give the customer what they want, when they want it, and how they want it."

Some dealers question whether a central stock model will be effective in the U.S., where many buyers expect to be able to visit a dealership and drive away with a new car.

Not having a robust inventory of EVs to sell from could put them at a competitive disadvantage, dealers said.

"Customers will be able to go to a Lexus store, or a Mercedes store and drive a vehicle home," said Todd Bondy, operating partner at Volvo Cars Oklahoma City. "If they want a Volvo, they'll likely have to wait a few days."

Jorge Gutierrez, corporate strategist at 20-brand Bert Ogden Auto Group in Texas, sees the benefit of holding EVs off-site, especially in his market, where EV sales have been slim. If returning customers already know which model they want, they'll likely be comfortable waiting a few days for the vehicle to arrive.

"But when we're conquesting customers from other brands, does that become an issue?" asked Gutierrez, whose group sells GM brands and Volvo.

"I'm not going to be as inclined to buy a car from a catalog or computer screen versus actually seeing, driving, testing the quality," he said. Holding vehicles elsewhere would require customers to "rewire their brain for that instant gratification when buying a car."

Volvo and GM have not specified how long it would take to fill orders from the lots. Gustafsson previously noted that it would depend on production capacity and consumer interest and said it would have to be within the limit that customers are willing to wait.

Justin Gasman, finance director at McCaddon Cadillac-Buick-GMC in Boulder, Colo., fears the impact on dealers if vehicles at the central lots turn slowly.

"When they don't sell, then what are they going to do? They're going to stuff them down the dealers' throats," he said. "I don't think that's a feasible model."

The success of EVs — whether customers buy them out of a dealership's inventory or through a nearby hub — depends on the vehicle itself, said John Hiester, dealer principal at Hiester Automotive Group in North Carolina.

"If they build a product that consumers want, the distribution channel they have is fantastic," Hiester said. "Dealers aren't afraid of stocking inventory if it's inventory that they can move."

He worries that automakers are losing sight of the advantage that they have with a dealer network, he added.

"They see the money that dealers are making and they think if they eliminate the dealers from the mix, they're going to succeed or be more profitable," Hiester said. "And I just don't see it."

Stocking EVs on dealership lots also gives retailers an opportunity to educate customers new to EVs, Hiester said.

He is training his team on EVs and investing in new infrastructure now, long before an influx comes to the market. "We need to look at things like charging lots ... in front of our dealership so we can get customers coming in just to see whatever it is that we're marketing," he said. "You can't do that at a storage lot."

In March, new EV registrations increased to 3.1 percent of the market, according to IHS Markit. That's significantly more than they had represented recently but still only a sliver of the overall market.

Central lots could shift pressure to sell EVs from dealers to automakers, said Mike Bowsher, owner of Carl Black Automotive Group in Kennesaw, Ga., and chairman of Chevy's national dealer council.

"They're going to be handling the holding costs of the centralized stock, so it's up to them to make sure the [vehicles are] moving, incentivewise or whatnot," he said.

The model could also identify market trends. As new EVs debut, dealers won't necessarily know which colors or trim levels will sell in their markets, said Howard Drake, dealer principal at Casa de Cadillac, Buick-GMC Sherman Oaks and Subaru Sherman Oaks in Southern California. Nearby pools with a selection of trims and colors could be helpful for a while, he said.

"I can sell three a month, but which three? Are they black? Are they high trim, low trim? This will give us a chance to answer some questions," he said. "I don't think [central stock is] going to be the answer over a long period of time because eventually I'm going to figure out my market, what's best for my customers. I'm going to want to order specific to my store."

The first GMC Hummer EV pickups are scheduled to reach dealerships late this year to fill customer reservations, which sold out within minutes last fall. Cadillac and GMC are still working through their EV distribution strategy before the Hummer launch and next year's release of the Cadillac Lyriq.

"We are working with our Cadillac National Dealer Council on the allocation model," said Mahmoud Samara, vice president of Cadillac North America. "We have already had a couple of discussions, and I feel we are in a good place whereby we'll have a plan that is aligned between what Cadillac wants and also a plan that is ready for the dealers to act upon."

Bowsher said Chevy has worked with its dealer council over the last 18 months to develop a digital retail platform and EV distribution model that will benefit both GM and dealers.

"The folks that may have concerns about a direct model haven't been involved behind the curtain," Bowsher said. "I can assure them that there is no plan whatsoever to go to a direct model."