GM EVs at Costco Auto Help Boost EV Sales

DETROIT— General Motors has a not-so-secret weapon when it comes to attracting American consumers to its new all-electric vehicles: Wholesale Costco.

The Detroit automaker said it is increasingly using the retail giant's Costco Auto Program for electric vehicles as it expands its portfolio from niche vehicles to mass-market segments with vehicles like the Chevrolet Equinox and Chevrolet Blazer EV.

“We have a great partnership with Costco and I'm very bullish on Costco because I like their brand,” GM North America President Marissa West told CNBC during a recent interview. “I encourage the team to look at how we can build this partnership.”

West sees electric vehicles 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 Costco Auto's exclusive automotive partner in Canada.

Automobile manufacturers such as GM, Ford engine and volkswagen have been shifting their electric vehicle strategies in recent months in an effort to boost sales and achieve long-elusive gains in vehicles. Brands have abandoned all-electric messaging, leaned toward hybrid vehicles as a bridge to adoption, and established charging partnerships to increase consumer confidence in the market.

A middleman like Costco, which has a strong customer demographic for new vehicle buyers, could help boost EV sales.

Costco Auto, a third-party service of the wholesale retailer, does not sell the vehicles, Costco said. Instead, it acts as a facilitator or partner for franchise dealers and automakers like GM, offering Costco members special pricing on vehicles through 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 represents at least 3% of all vehicles sold in the US 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.

A growing number of vehicle sales made through Costco Auto are electric vehicles, Costco said. About 7% of members' vehicle requests to Costco Auto were related to electric vehicles in 2023, according to Maxwell.

“Our members have always liked new things and electric vehicles are absolutely new to the market,” Maxwell said. “This is a great way for [automakers] market and present their electric vehicles to interested people. “Costco has a very strong demographic that fits well with EV buyers.”

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

Costco Auto partners with automakers like GM to offer nationwide discounts, as well as separate partnerships with more than 3,000 franchised dealers across the United States, which it calls its “Everyday Auto” program, Costco said.

The automakers' deep discounts can be used at any franchised dealership, or Costco will suggest a partner dealership where shoppers can work with a trained Costco Auto employee, the retailer said.

Such distributors have specially trained employees who know all the incentives available and offer no-haggle prices that are competitive with their market, Maxwell said.

“It has a pre-negotiated price already set and we work with the dealer every month to make sure it is up to date and competitive in the market,” Maxwell said. “You know the price is going to be great because you're getting it through Costco and you can really focus and enjoy the shopping experience.”

GM is currently offering Costco members nationwide a $1,000 incentive “certificate” on Equinox, Blazer and Cadillac Lyriq electric vehicles through July. The exclusive Costco discount is in addition to any other company or distributor incentives, Maxwell said.

“There are some pretty strong incentives in the EV market right now, so they get that extra value,” Maxwell said. “It really makes it an attractive deal for someone considering an electric vehicle.”

The often high price of fully electric vehicles has proven to be an obstacle to their mass adoption. Industry executives such as GM CEO Mary Barra have cited pricing, along with charging infrastructure and consumer education, as contributing to a slower-than-expected pace of EV sales.

Cox Automotive reports that the average transaction price for electric cars in the US was $55,242 in April. According to Cox, that's a premium of more than $10,000 compared to gasoline-powered vehicles.

Costco member incentives typically last between 60 and 90 days, and members can also receive other offers on used vehicles, maintenance and service, according to Costco. Participating retailers are currently offering 15% off auto repair, up to $500 off.

Dealers and auto manufacturers that partner with Costco Auto also take advantage of Costco's reputation and consumer experience. GM has been a Costco Auto partner in the US since 2011 and in Canada since 2019.

“What do you know about Costco? You know they stand behind their product. You know you're going to get a good value,” West, a Costco member, told CNBC. “I think the Chevrolet brand especially has great synergy with Costco.”

Costco members are largely made up of suburban and urban households, and 58% are between approximately 42 and 59 years old, according to Numerator. The market research firm reports that Costco members also tend to be wealthy: 35% of members earn more than $125,000 (25% more than shoppers at the average retailer) and 46% earn between $40,000 and $125,000.

Buyer age and income are key demographic considerations for auto companies like GM, which are working to get more electric vehicles into the garages of American drivers.

Costco shoppers are also highly loyal, preferring the retailer over many other stores, according to global marketing data and analytics firm Kantar.

“Costco members are extremely loyal to Costco,” Julie Craig, Kantar's vice president of purchasing insights, 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 partner dealers pay Costco Auto a subscription fee, largely to cover marketing and advertising of the vehicles, Maxwell said. He declined to disclose the companies' underwriting costs.

The Costco Auto Program was initially part of wholesale competitor Price Club, which merged with Costco in 1993.

– CNBC Melissa Repko contributed to this article.