GM Expands Partnership with Costco to Drive Sales of Electric Vehicles

General Motors (GM) is leveraging a partnership with Costco Wholesale to boost sales of its new all-electric vehicles (EVs) in the U.S. GM sees this collaboration as a “huge opportunity” to expand its reach among Costco’s 50 million members. The automaker is also the exclusive automotive partner for Costco Auto in Canada. By utilizing the Costco Auto Program, an intermediary service that offers special pricing and incentives to Costco members, GM aims to tap into Costco’s robust customer base for new vehicle buyers.

The use of an intermediary like Costco can be instrumental in driving EV sales, especially considering the retailer’s large customer demographic. Costco Auto doesn’t directly sell vehicles; instead, it acts as a facilitator between franchised dealers and automakers like GM, providing members with discounts and incentives. Over the past five years, Costco Auto has facilitated over 500,000 vehicle sales annually on average, accounting for at least 3% of total annual vehicle sales in the U.S. This volume surpasses the sales of large publicly traded dealer groups such as Lithia Motors and AutoNation.

While GM hasn’t disclosed the exact number of Costco customers who have purchased its vehicles through the program, it’s worth noting that a growing number of Costco Auto sales are for electric vehicles. In 2023, approximately 7% of member requests for vehicles were related to EVs. Costco’s strong demographic aligns well with EV buyers, making it an ideal platform for automakers to showcase their EV offerings.

Apart from GM, Costco Auto has also partnered with other automakers such as Volvo, including its Polestar EV startup brand, and Audi. The company offers nationwide discounts through its partnerships with automakers and over 3,000 franchised dealers across the U.S., collectively known as the “Everyday Auto” program. Costco ensures that its members receive haggle-free pricing that is competitive with the market, thanks to its pre-negotiated deals with dealers. This provides a seamless and enjoyable buying experience for Costco members.

To incentivize Costco members to purchase EVs, GM is currently offering a $1,000 incentive “certificate” on its Chevrolet Equinox, Blazer, and Cadillac Lyriq EVs. This Costco-exclusive discount can be combined with other company or dealer incentives, making it an attractive offer for potential EV buyers. The high price point of EVs has been a barrier to mass adoption, and automakers like GM are actively addressing this issue through various incentives and discounts.

Costco’s reputation and consumer experience also benefit automakers and dealers who partner with Costco Auto. The retailer’s brand loyalty and perception of value make it an appealing platform for customers. Costco members are typically affluent suburban and urban households, with 35% making above $125,000 annually. Additionally, these members show a strong preference for Costco over other stores due to the perceived savings and value it offers.

Automakers and dealers pay a subscription fee to Costco Auto, which primarily covers marketing and advertising costs for the vehicles. While the exact subscription costs are undisclosed, this arrangement allows automakers to leverage Costco’s extensive reach and customer loyalty to promote their EVs effectively.

In conclusion, GM’s partnership with Costco Wholesale through the Costco Auto Program presents a significant opportunity for the automaker to expand its EV sales. By tapping into Costco’s large customer base, GM can reach a broader audience and overcome barriers to EV adoption such as price sensitivity. The collaboration benefits both parties, with Costco providing its members with exclusive discounts and incentives while automakers gain access to a loyal customer base. Overall, this partnership showcases the growing importance of strategic collaborations in the automotive industry’s transition to electric mobility.