GM is Happy to Service Teslas at Dealerships, Sales Model Will Evolve

Tesla has the benefit of successfully revolutionizing the automotive industry, but GM is set to charge hard into the all-electric, software defined vehicle (SDV) future. GM feels they will get ahead thanks to the customer service experience through their dealer model. So much so, that many Teslas sold by direct sales make their way into GM dealership service bays, giving Tesla owners a chance to see just how high-tech GM latest cars really are, and to see how the traditional dealership experience is evolving to meet future consumer needs with lean inventories and quick order-to-delivery turnarounds.

We know that, for the most part, the dealership experience isn't the most positive part of the car owning experience. At least, not initially. The insane markups and lack of some sort of true, lasting punishment against dealers who practice steep markups really doesn't lend itself to consumer confidence. That's why companies like Tesla, Rivian, and others now offer a direct sales model in many markets under the idea that dealing directly with the manufacturer is the better way to buy and service a vehicle. But GM believes the service side of vehicle ownership is still where traditional dealers come ahead of direct sales models in customer experience, for the most part.

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The Bad Side of Direct Sales

During GM's Investor Day on November 17, Mark Reuss, President of GM, pointed out that since 2021, their dealers created 11,180 repair orders that had "Tesla" as a vehicle's make or model. "That's a growing business for us, I've got to say. It's a new business, which is great," Reuss stated, with the audience of GM's investors reacting with a slight chuckle.

The biggest reasons Reuss pointed out centered around the idea that a brick-and-mortar dealership is still the trusted source of repairs, along with GM's long history with customer service. "And [customers] know that we have the service bays and the dealerships in place," said Reuss.

"This is why Tesla is now investing millions to replicate the brick-and-mortar service centers we already have. In fact, they are actually locating some of those close to where we are," Reuss quipped. The other advantage for GM is that their dealer network is massive; there is a dealership within 10 miles of 90 percent of the U.S. driving public.

In turn, there is an advantage for GM in getting a Tesla owner's vehicle serviced at a GM dealership. A dealership is "Where they'll be exposed to our beautifully designed, high-tech product portfolio," said Reuss, "So, when they go into those service bays, they're going to see our portfolio... And that's a big deal for us, as well."

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Evolution of Buying From GM

While Reuss makes a great argument on why the brick-and-mortar dealership model isn't going anywhere, it is a model that's ripe for evolution, if not revolution. With an estimated million units of planned annual EV capacity by 2025, dealers need an overhaul and that's where GM is making strides in the U.S.

It's more than just the capability of servicing EVs, but also how these and remaining new and used ICE-powered vehicles will be sold. "In short," Reuss said, "our dealers are ready for this and—like us—they are getting better, every single day. We support them and they support us because we both have the same goals: satisfy every customer and foster customer loyalty."

This mutual support will come in conjunction with a new dealer strategy where GM is working with Tekion, a cloud services provider specializing in the automotive industry, to change how vehicles are purchased by their customers. The pair is creating a digital retail platform (DRP) that will allow customers to shop for their vehicles, which is already being used to sell the Chevrolet Bolt, used vehicles through CarBravo, and will come to Cadillac dealers in 2023.

According to Reuss, it will be a "world class retail, end-to-end platform" and provides "transparent VIN level pricing with full (finance and insurance) menu integration." It's also allowing for an automated process that reduces some of the IT and financing workload that a dealership would normally have to deal with. The service is part of a promise by GM that customers will be able to do a full transaction online, at the dealership, or anywhere in between, which will be called: "Buy Your Way."

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New Fulfillment Centers

Another new GM selling strategy deals directly with the plan for only all-electric vehicles by using EV fulfillment centers that are directly owned by GM, with two currently located in California and a third in Georgia. These fulfillment centers, according to GM, allow delivery of an exact configuration EV to a customer in as little as four days from when it's ordered. In comparison, according to Reuss, other OEMs can take anywhere from six to eight weeks to make similar delivery times.

These fulfillment centers also help dealerships reduce inventory costs and will be stocked with fast turning products, like Chevrolet Bolt EVs and EUVs. Meanwhile, dealers will still have inventory for those customers who want to test drive vehicles and for anyone looking for same day deliveries, and those who are willing to compromise on exact features for that convenience.

Much of this stock fulfillment for both GM's centers and dealerships will be facilitated by machine learning tools that get sales information from cloud data on what vehicles are selling and where. This allows for lean running at the dealer while also being flexible to change their stock fulfillments without affecting the ability for a customer to buy what they want, exactly when they want it.

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This all comes at a cost cutting advantage, too. GM estimates its new strategies will lower the cost of selling a car by $2,000. Keep in mind, that is a cost saving for the dealer, not necessarily to the customer. As far as price gouging at the dealership is concerned, the only way that's going to change is if dealers start losing money due to the practice. However, the ability to buy online and have a semi-direct sales experience could be a good strategyto help curb most of that dealer and markup sales abuse.