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Chevy Dealers Need a Jolt from the Volt

February 9th, 2008 | Posted in: Brand, Financial

greg_h.jpg

GM relies on its dealers to sell cars to consumers, and the dealers rely on GM to produce good products, brands, and advertising. As U.S. sales declined over the years dealers also suffered.

GM is considered by many to be in the midst of a turnaround spearheaded by Rick Wagoner, in his role since 2000. Clearly transforming themselves into a green company is a major component of this turnaround along with increasing poructivity, decreasing costs, and building better cars.

Whereas the Chevy Volt has become the object of our desires for its ability to displace petroleum, it also may be becoming a beacon of hope for Chevy dealers.

An article in Automotive News features an interview with Greg Heinrich, co-chairman of the Chevrolet dealer council.

The discussion covers several problems the dealers face including the fact that there are 4000 of them as compared to Toyota’s 1500, and that their rents are high.

When asked what the Volt could do for Chevy dealers, Mr. Heinrich replied,

“It would do a tremendous amount. It would put us to the front of this whole concept GM has of the gas-friendly to gas-free. I think we’ve passed Toyota on our technology. The Volt would cement GM’s plans on where it’s going with technology”

Source (Automotive News)

Posted by: Lyle

24 Responses to “Chevy Dealers Need a Jolt from the Volt”


  1. Rashiid Amul
    Vote -1 Vote +1Rashiid Amul     Says:
    February 9th, 2008 at 3:45 pm

    I think the dealers smell blood.

    I do feel sorry for them in a way though. They haven’t really had anything worth selling and they can see their sales slipping away to the foreign dealerships. The Volt will probably be a good thing for them, while at the same time, I hope they remember not to make it a bad thing for us (ie. price gouging).  

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  2. Van
    Vote -1 Vote +1Van     Says:
    February 9th, 2008 at 3:52 pm

    No doubt about it, putting the car that actually meets the expectations fostered by GM, in the showroom ahead of the Plug-in Prius, would put folks in the showrooms. But that begs three questions, will the Volt live up to its hype and will it be in the showrooms before the Plug-in Prius hits in 2011, and thirdly, will it be cost competitive with the Plug-in Prius?

    Right now the new Malibu is “as good” as the Camry, but not too many people see it as better. The Volt may well be better than the Prius, and that would be great. Go Volt!  

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  3. noel park
    Vote -1 Vote +1noel park     Says:
    February 9th, 2008 at 4:28 pm

    NO S__T!

    The only questions are:

    1) Will they be able to hang on for 3 years until the Volt arrives and

    2) Will there be enough Volts to make a difference for the poor souls.

    Maybe the 1.4 turbo Cobalt and the new Aveo will help to take up the slack, assuming the they get good enough mileage to compete with the Yaris, Fit, Versa, Civic, Corolla, et al. I sure hope so.  

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  4. Jeff J
    Vote -1 Vote +1Jeff J     Says:
    February 9th, 2008 at 5:17 pm

    You can bet your last dollar that the blood sucking dealers would and will get the the most money out of this car(price gouging) and the hype that will be around this car . Hope for the best and plan for the worst… After taking a poll of all my family (18 driving ) 95% drive under 40 miles a day , and 100% under 60 miles . This EV would be the first vehicle that make a real impact on my whole family , I own a auto repair shop(www.atcbg.com) and my dad was thinking of going hybrid , and every year I am telling him to hold off , Cost of new car vs. gas savings plus new technology bugs (ie.85 corvette crossfire- nightmare) , it would take close to ten years justify. But the GM volt changes everything . Also you can bet that If the GM Volt is a Big Hit with buyers their will be 7 other models out the next year so yes price will sky-rocket but will also level off fast , I have been waiting for something like this for 42 years I can happily wait another 5yrs knowing that the end of Big Oil and middle east oil shakes years are numbered. And if EEstor claims are justified and the volt could go 80 miles, WOW it just gets better and better. This technology is a GAME changer folks , enjoy the ride  

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  5. Dan Livingston
    Vote -1 Vote +1Dan Livingston     Says:
    February 9th, 2008 at 5:47 pm

    After my friends did interviews at GM in Warren, MI, they all feel GM is not serious about hiring battery scientists and engineers at all. GM asked a lot of questions about automotive application (not surprising), but virtually no questions regarding battery testing, battery assembling and safety controls. Considering battery is probably the only hurdle to the roll-out of Volt, something just does not look good here!Out of 4 people, only one got offer, but declined it. Come on, GM, make people trust you can’t be done by words, but by action.
    Now I will save money for Prius PHEV, and forget about GM. No wonder they are sinking against the Japanese!  

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  6. nasaman
    Vote -1 Vote +1nasaman     Says:
    February 9th, 2008 at 6:38 pm

    3. noel park

    You’ve asked the key questions, Noel….

    “1) Will they be able to hang on for 3 years until the Volt arrives and

    “2) Will there be enough Volts to make a difference for the poor souls.”

    I just saw in the news that Chrysler is closing several plants and has asked all its dealers to consolidate Jeep, Dodge & Chrysler into one dealership. Even in the rapidly-growing Orlando area, where the “world’s largest Chevy dealership” was opened not long ago, lots of other dealers have been consolidating brands and/or adding imported brands like Subaru or Hyundai to their US brands for several years now ….just to survive.

    The Volt could prove to be the most important “showroom magnet” GM has introduced for many years –and if Chrysler & Ford follow suit with well-designed E-REVs they might also benefit from the “Volt’s Jolt” to the marketability of American-made cars! ;)   

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  7. Dave B
    Vote -1 Vote +1Dave B     Says:
    February 9th, 2008 at 7:41 pm

    Hate to say it, but Tesla taught GM more than just building EVs… They also proved you can sell cars on the Internet.  

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  8. john1701a
    Vote -1 Vote +1john1701a     Says:
    February 9th, 2008 at 8:01 pm

    >> They also proved you can sell cars on the Internet.

    Really?

    So… how do you explain the first 2.5 years of Prius availability here?

    Orders were only accepted through the internet during that time.  

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  9. Grizzly
    Vote -1 Vote +1Grizzly     Says:
    February 9th, 2008 at 8:23 pm

    And how do you explain the EV-1? GM built electric cars long before Tesla was even a twinkle in Eberhard’s brain.

    Oh, and BTW, Tesla doesn’t build anything at all, Lotus does.  

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  10. Mark Bartosik
    Vote -1 Vote +1Mark Bartosik     Says:
    February 9th, 2008 at 11:11 pm

    Price gouging by dealers is about the only thing that would delay my purchase of a Volt. It would be difficult for a dealer to squeeze more than a few dollars above MSRP out of me. If MSRP is $40K I’d probably pay it, but if MSRP is $36K and dealer is asking $37K then no chance just on principle, I don’t see the dealer as adding much value. If that delays my purchase it just leaves time for the competition.

    So GM be careful of letting dealers price gouge, it leaves a bad taste.  

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  11. Haid D' Salaami
    Vote -1 Vote +1Haid D' Salaami     Says:
    February 10th, 2008 at 12:03 am

    # 5, perhaps you your firends were not that good, that smart and could not sell themselve in the interview and that is why they did not get the job. Yiou sound like that dude that come here every now and then, claiming his “brother in law” heard this, and now “friends” did not get the job because GM is not going no where. Did you your friends find a job at one of those Japanese firms???  

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  12. Rob Stone
    Vote -1 Vote +1Rob Stone     Says:
    February 10th, 2008 at 12:13 am

    Look, folks, Prius-bashing is a useless exercise: my ‘06 Prius works great and I’ve averaged 46-mpg over the two years I’ve had it. Believe me, I would have given a Big Three hybrid a careful look three years ago, but they had no (as in zip, zero, zilch, nada) competing model. I want the Volt to succeed, but I’m not setting fire to my Prius in a fit of “patriotic pique” when it becomes available.  

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  13. Jim I
    Vote -1 Vote +1Jim I     Says:
    February 10th, 2008 at 12:13 am

    I think the initial pricing will depend completely on how many Volt’s are available for sale on the first day. If there are only a few thousand, then the dealers will be marking them up as far as the first buyers will let them. If there is a generous supply, then it will be tough to maintain anything above MSRP.

    Lets not forget that the people here are way above the curve on being ready to change over to this new technology. The average car buyer will not be beating down the doors of the dealerships to get them. They will wait to see if they work first, and then begin to make the change after they see some on the road, and begin to talk to people like us on how they are performing. Finally, they are going to wait for “GM & dealer incentives”…..

    That is one of the reasons that GM is starting to show ads now for a car that will not be available for about three years. They are trying to build demand, but it will be tough, since there are really no other vehicles available to do an apples to apples comparison.

    Me personally, if the dealer has this marked up over MSRP, I will wait. I will have already waited almost four years , what is a few more months? If GM really wants to sell these by the millions, they should put a policy of MSRP is the maximum price for their dealers, and not punish us for wanting to be early adopters!  

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  14. Grizzly
    Vote -1 Vote +1Grizzly     Says:
    February 10th, 2008 at 12:50 am

    I’d love to see GM do away with dealerships. Not possible I know, but it is an interesting concept.

    You would buy your car over the internet w/o a middle man and it would be delivered to a GM distribution/service center near you, where you would pick it up.

    Not only would this be simpler, but it would save both the consumer and GM a lot of money and time. The consumer would save because there would be no middleman to mark up the car and play games. GM would save a ton in dealer billings for warranty labor etc by having it’s own service centers.

    There are also some downsides to this, and it won’t happen, but I remember years ago with the advent of the internet it was considered by a few car makers, and IIRC GM was one of them.  

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  15. David L
    Vote -1 Vote +1David L     Says:
    February 10th, 2008 at 1:56 am

    I’m probably dreaming – but here’s what I would like to see:

    September 2010: GM starts offering online sale of the 2011 model Volt over the Internet, with future delivery to a local dealer in US and Canada. The price will be the fixed MSRP, no negotiations are considered, and the dealer gets a fixed fee from GM for completing the delivery.

    January 2011: Volts start being delivered to dealers to fulfill online orders.

    March 2011: Dealers start getting additional Volt inventory for direct sales to customers. Dealers may sell at MSRP or offer discounts – but cannot sell for more than MSRP. GM continues with online sales at MSRP, with fixed fee for dealer.

    July 2011: GM announces 2012 model year Volt with with expected inventory in October 2011. GM discontinues online sales of 2011 Volt, shipping remaining inventory to dealers.

    September 2011: GM starts offering online sale of the 2012 model Volt over the Internet …

    … and so on …

    This allows the early adopters to purchase online, with GM getting guaranteed margins (due to no price negotiations), but also not cutting the dealers entirely out of the loop. Dealers get a guaranteed fee for online sales, but when there is only six months left for selling a particular model year – then can reduce the price to be competitive with each other – benefiting the consumer. I honestly think that this could a scenario where GM, the dealers, and the customer can all do well for themselves. :-)   

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  16. Jeff M
    Vote -1 Vote +1Jeff M     Says:
    February 10th, 2008 at 2:09 am

    Grizzly, GM and Toyota, Ford, and the other auto makers may have all had EV’s before Tesla thanks to CA’s ZEV mandate (before it was gutted)… however EV’s are over 100 year old technology pre-dating the internal combustion engine. Some even got 40 miles/gallon! (or course they didn’t have a range extender, and there were no “highways” so didn’t need to go highway speed)

    In any case, the biggest challenge mass marketing EV’s is that a pure EV has anywhere between 70-90% fewer moving parts than a conventional car with an internal combustion engine. As such, it needs signficantly less servicing and replacement parts (no engine oil, transmission fluid, spark plugs, exhaust system, fuel & air filters, tons of air/vaccum hoses, igniton coils, engine coolant, catalytic converter, oxygen sensor, air mass sensor, alternator, etc etc etc). Yes, the Volt has an internal combustion engine as part of it’s range extender generator set, but with 40+ EV only range, for some it may never be used, or at least not most of the time.

    Quoting from Sherry Boschert’s book “Plug-in Hybrids”… “For auto dealers, service and parts sales made up 12% of dealer revenues in 2004, and those accounted for 57% of profits (new vehicle sales generated nearly 30% of profits, and used vehicle sales provided 13%. Average dealership netted $560,000 in profit before taxes.” (page 35)

    So that business model is going to need to change if dealerships are going to stay in business. The decreased revenue from service and parts, making more more than 1/2 their profits, needs to be made up somewhere. It could mean that the dealerships need to make their money up front on the sale of each car up front, instead of over the life of the car. Could be part of the reason why the MSRP for the Volt has gone from “comfortably under $30k” to possibly as much as $40k. Or it could mean fewer dealerships (consolidation) to the ones that are left each have a bigger piece of the market share pie.

    It also means a shift in the consumer mentality. Consumers, at least those who haven’t realized it already, need to look at the total ownership costs of a car, not just the up front cost. Ie. the EV’s may cost more up front, but they cost less to maintain, and hopefully also cost less to “fill up”. However that’s going to present a problem for some consumers who can’t afford to pay for the cost of a car up front.

    Interesting times ahead.  

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  17. Estero
    Vote -1 Vote +1Estero     Says:
    February 10th, 2008 at 7:34 am

    I agree with Rashiid Amul and others who think the dealers smell blood.

    Perhaps Lyle could interview Greg Heinrich, co-chairman of the Chevrolet dealer council, and talk about how they plan to address the “price gouging” issue.  

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  18. Glenn
    Vote -1 Vote +1Glenn     Says:
    February 10th, 2008 at 12:36 pm

    I recently decided that when I pass a dealership and I have the time, it would be worthwhile to stop in and ask about plug in cars: “When” for Chevy, Subaru, Mitsu, Volvo, Ford and Toyota, and “if” for Honda et. al. The more dealerships in various locations, the better. I figure that If they get questions (that they usually can’t answer), they just might relay them up the food chain. Optimistic, I know, but you have to start somewhere.

    About a week ago I was at my mom’s in central CA and was a little bored so I stopped in to a Chevrolet dealership to ask about the Volt. I have a pretty dim view of car dealership salespeople to begin with, and generally expect (and get) blank stares. I find that they typically have only a rudimentary education of the cars that they are selling, and rarely know anything about future cars. I was pleasantly surprised that the guy I spoke to even knew what I was talking about, and that he didn’t blow me off when he realized that I wasn’t itching to buy that day. We had a nice conversation about the Volt, that led to the Vue and Astra.

    Overall I’d give him a B+ on his knowledge and his willingness to engage. I think he had educated himself better than most, but maybe there is a change in the air. He gave me a nice little brochure that talked about efficiency of current GM models as well as 2-mode, e-flex and fuel-cell future cars, with the Volt prominently presented.

    And, concerning dealerships and salespeople, maybe GM should make this site required reading. How often do you see the sales guys huddled just outside the main door in groups of 3 or 4 smoking and waiting for customers. Its not like they don’t have time.

    http://www.pluginpartners.org/whatYouCanDo/onlinePetition.cfm  

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  19. Grizzly
    Vote -1 Vote +1Grizzly     Says:
    February 10th, 2008 at 7:23 pm

    Jeff M. #16

    Agree. These are definitely interesting times. Survival or not may very well depend on how business is done, and it may not be the way it’s been for the past 100 or so years.

    Consider that before 1993 or so it was impossible to even surf the web unless you were at a gov’t facility or university, and even then it was peanuts compared to today.

    Things are going to change, and the only thing I can tell you is that dealerships…with the technology we have today…are a FAT paycheck middleman that aren’t necessary. Moreover it affects the bottom line of every manufacturer of vehicles in what I believe is a “net” negative way.

    Parts sales are a huge part of revenue and profitability. However, I believe that lost sales through dealer markup and unnecessary warranty billings more than offset this. No math here just logic.

    Understanding that the Volt will use it’s ICE sparingly and might not need that many parts replaced can be dealt with. With today’s technology those few parts could be handled directly by GM by web order and any servicing by their regional centers.

    Leaner, meaner, and more direct is just the way I see it. Things change, and this is no exception.  

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  20. microsrfr
    Vote -1 Vote +1microsrfr     Says:
    February 10th, 2008 at 9:40 pm

    The dealers better make enough money on the sale to support their operation for there basically won’t be any service revenue. The brakes will last practically forever since most of the braking energy is regenerated back into the battery and the gas engine will operate less than 5% of the time. Maybe they can go into the add on and detailing business because, other than rotating the tires and replacing the wiper blades, there will be basically nothing to service!

    Chevy dealers — be careful what you wish for.  

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  21. John Schupp
    Vote -1 Vote +1John Schupp     Says:
    February 11th, 2008 at 7:14 am

    I don’t think GM can cut the dealers out by selling on line. I think it is against their franchise agreement.

    GM cannot even discuss prices with dealers. That would be price fixing and it is strictly illegal. The only way GM can insure the dealers don’t price gouge is to make sure there are enough Volts to go around. Competition with other dealers is the only thing that will control pricing.  

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  22. Jon P.
    Vote -1 Vote +1Jon P.     Says:
    February 11th, 2008 at 10:10 am

    Gm Delaers barely make any money off the sale of the car to the consumer. Believe me my family has been in the Car buisness for 30 years. If they make $500 dollars on the sale of a new car it’s alot. Now the volt you will probably pay a premium in the 1st year, but same thing for the viper, corvette, sh*t even the 2door civic SI has a premium the 1st year.
    Dealers make all of their money on what’s called the holdback. It was designed by ford in the early 90’s to bail out their dealerships. Basically it’s comes down to this. With the internet everyone knows the invoice price of a car (not the MSRP) the invoice price is what the dealer pays.
    The holdback is usually 3% of the cars value built into the invoice price. The manufacturer then cuts a check to the dealers every month or quarter for the holdback x number of cars bought from the manufacturer. (not sold, ordered)
    So honestly the only money dealers make off the consumer is:
    Cut of the financing money (interest paid on loan)
    Any extended warranties (they get usually 15% of the cost of the warranty)
    Maybe $500 up front, $1000 would be alot
    Any aftermarket parts, alarms, window etching, etc.
    If all in all a dealer makes $2500 bucks on the front side (consumer) of the deal its alot. the average would probably be more like $1500-$2000. Then they get another $600-$1200 depending on the price of the car on the back side (manufactuer). Making most new car sales worth an avg. of $2500. Which isn’t alot if you figure a car worth $25,000 and their total profit is usually around 10%.

    If you want to see ridiculos profit margins work up the numbers on a factory recertified(off-lease), or used cars. Dealers routinely make $2500-3000 just of the consumer, before extended warranties(alot more popular on a used car), but there’s no dealer holdback.  

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  23. noel park
    Vote -1 Vote +1noel park     Says:
    February 11th, 2008 at 11:52 am

    Grizzly, #14, et al:

    Again, Roger Penske is trying to get pretty close to this model with the Smart. Deposits on-line, each car built to order, minimal dealer inventory, overhead and infrasturcture.

    Granted that the Smart is sort of an ultimate niche car, it has to start somewhere. I have never seen The Captain as Mr. Personality, but he is one smart SOB nonetheles.

    Wait for it.  

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  24. Bobster
    Vote -1 Vote +1Bobster     Says:
    February 11th, 2008 at 2:57 pm

    I believe that there are state laws in many states “requiring” that new car be sold through dealerships. Probably a joint concern from the dealership associations (about losing sales) and the state (about losing sales taxes etc.) if sales went to the (relatively) unregulated and untaxed Internet.

    BTW: IMHO there is no such thing as “price gouging.” It’s all a measure of “Supply and Demand.” You can’t “gouge” a price that someone is willing to pay. Once supply goes up, the price has to come down. Perhaps not as quickly as we would like, but, barring government intrusion, supply and demand works.  

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