DETROIT — General Motors has a not-so-secret weapon when it comes to getting U.S. consumers into its new all-electric vehicles: Costco Wholesale.
The Detroit automaker said it’s increasingly using the retail giant’s Costco Auto Program for EVs as it expands its portfolio from niche vehicles to mass-market segments with vehicles such as the Chevrolet Equinox and Chevrolet Blazer EVs.
“We have a great partnership with Costco, and I’m really bullish on Costco because I like their brand,” GM North America President Marissa West told CNBC during a recent interview. “I am encouraging the team to see how we can build this partnership.”
West sees EVs as a “huge opportunity” to expand GM’s reach with Costco’s more than 50 million members in the U.S. The automaker is also the exclusive automotive partner for Costco Auto in Canada.
Automakers such as GM, Ford Motor and Volkswagen have been shifting their electric vehicle strategies in recent months in an effort to boost sales and achieve long-elusive profits on the vehicles. Brands have eased off all-electric messaging, leaned into hybrid vehicles as a bridge toward adoption and struck charging partnerships to boost consumer confidence in the market.
An intermediary such as Costco, which has a robust customer demographic for new vehicle buyers, could help move the needle for EV sales.
Costco Auto, a third-party service of the wholesale retailer, doesn’t sell the vehicles, Costco said. Instead, it acts as a facilitator, or partner, for franchised dealers and automakers such as GM, offering Costco members special pricing on the vehicles via discounts and other incentives, the retailer said.
Costco Auto has facilitated more than 500,000 vehicle sales annually over the past five years on average, according to Jay Maxwell, Costco Auto Program general manager responsible for strategic partnerships.
That volume, like that of many of Costco’s products, is a lot. It amounts to at least 3% of all vehicles sold in the U.S. each year and more than the annual sales of large publicly traded dealer groups such as Lithia Motors and AutoNation.
GM declined to disclose how many Costco customers have purchased GM vehicles through the program.
EV interest
A growing number of vehicle sales made through Costco Auto are of electric vehicles, Costco said. About 7% of member requests for vehicles to Costco Auto were related to electric vehicles in 2023, 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 Volvo, including its Polestar EV startup brand, Audi and others over the years.
Costco Auto partners with automakers such as GM to offer nationwide discounts in addition to separate partnerships with more than 3,000 franchised dealers from across the U.S., which it calls its “Everyday Auto” program, Costco said.
The sweeping discounts from automakers can be used at any franchised dealer, or Costco will suggest a partner dealer where shoppers can work with a Costco Auto-trained employee, the retailer said.
Such dealers have specially trained employees who are knowledgeable of all available incentives and offer haggle-free pricing that’s competitive with 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.”
GM is currently offering Costco members nationwide a $1,000 incentive “certificate” on the Equinox, Blazer and Cadillac Lyriq EVs through July. The Costco-only 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 often-steep price point on all-electric vehicles has proven to be a hurdle to mass adoption. Industry executives such as GM CEO Mary Barra have cited pricing alongside charging infrastructure and consumer education as contributing to a slower-than-expected sales pace for EVs.
Cox Automotive reports the average transaction price for electric cars in the U.S. was $55,242 as of April. That’s a more than $10,000 premium when compared with gas-powered vehicles, according to Cox.
The Costco member incentives typically last between 60 and 90 days, and members also can receive other deals on pre-owned vehicles, maintenance and service, according to Costco. Participating retailers are currently offering 15% off auto repair, up to $500 off.
Costco customers
Dealers and automakers that partner with Costco Auto also get to leverage 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 know that they stand behind their product. You know that you’re going to get a good value,” West, herself a Costco member, told CNBC. “I believe that the Chevrolet brand especially has great synergy with Costco.”
Costco members are largely made up of suburban and urban households, and 58% are between the ages of roughly 42 and 59, according to Numerator. The market research firm reports Costco members are also typically affluent, with 35% of members making above $125,000 — 25% higher than shoppers at the average retailer — and 46% making between $40,000 and $125,000.
Buyer age and income are both key demographic considerations for car companies such as GM that are working to get more EVs in the garages of American drivers.
Costco shoppers also are very loyal and prefer the retailer over many other stores, 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 offsets the membership fees, and that Costco offers them value beyond what they can get at other stores.”
Automakers as well as associated dealers pay Costco Auto a subscription fee, largely to cover marketing and advertising for the vehicles, Maxwell said. He declined to disclose subscription costs for the companies.
The Costco Auto Program was initially part of wholesale competitor Price Club, which merged with Costco in 1993.
– CNBC’s Melissa Repko contributed to this article.
Read the full article here