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GM Teams Up with Costco to Promote New EVs

GM Teams Up with Costco to Promote New EVs

DETROIT – General Motors (GM) has found an ally in its efforts to get U.S. consumers behind the wheel of its new electric vehicles (EVs): Costco Wholesale.

The Detroit-based manufacturer announced it is increasingly leveraging Costco’s Auto Program for EVs to expand its offerings from niche to mainstream market segments, featuring models like the Chevrolet Equinox and Chevrolet Blazer EVs.

“We have a wonderful relationship with Costco, and I’m really optimistic about Costco because I like their brand,” GM North America President Marissa West told CNBC. “I am encouraging the group to see how we can create this relationship.”

West views EVs as a “huge opportunity” to extend GM’s reach among Costco’s more than 50 million U.S. members. GM is also the exclusive automotive partner for Costco Auto in Canada.

Automakers like GM, Ford, and Volkswagen have recently adjusted their EV strategies to boost sales and achieve long-sought profitability. These brands have eased their push on all-electric models, leaned into hybrids as a transitional solution, and formed charging partnerships to build consumer confidence.

Costco, with its strong customer base for new vehicle buyers, could significantly influence EV sales.

Costco Auto, a third-party service of the wholesale retailer, doesn’t sell vehicles directly. Instead, it acts as a facilitator for franchised dealers and automakers like GM, providing Costco members with special pricing through discounts and incentives, according to the retailer.

Costco Auto has facilitated an average of over 500,000 vehicle sales annually over the past five years, said Jay Maxwell, general manager of Costco Auto Program responsible for strategic partnerships.

That volume represents at least 3% of all vehicles sold in the U.S. each year, surpassing the annual sales of large publicly traded dealer groups like Lithia Motors and AutoNation.

GM declined to disclose how many Costco customers have purchased its vehicles through the program.

Rising Interest in EVs

A growing number of vehicle sales through Costco Auto are EVs, the retailer said. About 7% of member requests for vehicles to Costco Auto in 2023 were related to EVs, according to Maxwell.

“Our membership has always liked new things, and EVs are absolutely new to the marketplace,” Maxwell said. “This is a great way for the [automakers] to market and get their EVs out in front of people that are interested. Costco has a very strong demographic that fits well with EV buyers.”

In addition to GM, Costco Auto has partnered with brands like Volvo, including its Polestar EV startup, Audi, and others over the years.

Costco Auto partners with automakers like GM to offer nationwide discounts, alongside separate partnerships with over 3,000 franchised dealers across the U.S., which it calls its “Everyday Auto” program.

These discounts can be used at any franchised dealer, or Costco will recommend a partner dealer where shoppers can work with a Costco Auto-trained employee.

Such dealers have specially trained employees knowledgeable about all available incentives and offer haggle-free pricing competitive within their market, Maxwell said.

“It has a pre-negotiated price already established that we work with the dealer every month to make sure that it’s updated and it’s market competitive,” Maxwell said. “You know the price is going to be a great price because you’re getting it through Costco, and you can really focus on and enjoy the buying experience.”

Currently, GM is offering Costco members a $1,000 incentive on the Equinox, Blazer, and Cadillac Lyriq EVs through July. This discount is in addition to any other company or dealer incentives, Maxwell said.

“There’s some pretty strong incentives going on in the market for EVs right now, so they get that additional value on top of it,” Maxwell said. “It really makes it a compelling offer to somebody who is considering an EV.”

The high price of all-electric vehicles has been a barrier to mass adoption. GM CEO Mary Barra has cited pricing, charging infrastructure, and consumer education as factors slowing EV sales.

Cox Automotive reports the average transaction price for electric cars in the U.S. was $55,242 as of April, over $10,000 more than gas-powered vehicles.

Costco member incentives typically last between 60 and 90 days, and members can also receive deals on pre-owned vehicles, maintenance, and service, Costco said. Participating retailers currently offer 15% off auto repair, up to $500 off.

Costco Customers

Dealers and automakers partnering with Costco Auto can also benefit from Costco’s reputation and consumer experience. GM has been a Costco Auto partner in the U.S. since 2011 and in Canada since 2019.

“What do you know about Costco? You are aware of their commitment to their goods. You know that you’re going to get a good value,” West, a Costco member, told CNBC. “I believe that the Chevrolet brand especially has great synergy with Costco.”

Costco members primarily consist of suburban and urban households, with 58% aged between roughly 42 and 59, according to Numerator. The market research firm reports that Costco members are typically affluent, with 35% earning above $125,000 and 46% earning between $40,000 and $125,000.

Buyer age and income are key demographic considerations for car companies like GM aiming to get more EVs into American garages.

Costco shoppers are also very loyal and prefer the retailer over many others, according to global marketing data and analytics firm Kantar.

“Costco’s members are extremely loyal to Costco,” Julie Craig, vice president of shopping insights at Kantar, said in a statement. “These members feel that the savings they receive through their memberships offset the membership fees and that Costco offers them value beyond what they can get at other stores.”

Automakers and associated dealers pay Costco Auto a subscription fee, mainly for marketing and advertising, Maxwell said. He declined to disclose the subscription costs.

The Costco Auto Program began as a division of Price Club, a wholesaler that merged with Costco in 1993.