Customers exit a Costco store in Teterboro, Latest Jersey, June 28, 2023.
Kena Betancur | Corbis News | Getty Images
DETROIT — General Motors has a not-so-secret weapon on the subject of getting U.S. consumers into its latest all-electric vehicles: Costco Wholesale.
The Detroit automaker said it’s increasingly using the retail giant’s Costco Auto Program for EVs because it expands its portfolio from area of interest vehicles to mass-market segments with vehicles reminiscent of the Chevrolet Equinox and Chevrolet Blazer EVs.
“Now we have a terrific 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’m encouraging the team to see how we are able to construct this partnership.”
West sees EVs as a “huge opportunity” to expand GM’s reach with Costco’s greater than 50 million members within the U.S. The automaker can be the exclusive automotive partner for Costco Auto in Canada.
Automakers reminiscent of GM, Ford Motor and Volkswagen have been shifting their electric vehicle strategies in recent months in an effort to spice up 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 spice up consumer confidence out there.
An intermediary reminiscent of Costco, which has a sturdy customer demographic for brand 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. As an alternative, it acts as a facilitator, or partner, for franchised dealers and automakers reminiscent of GM, offering Costco members special pricing on the vehicles via discounts and other incentives, the retailer said.
Costco Auto has facilitated greater than 500,000 vehicle sales annually over the past five years on average, based on Jay Maxwell, Costco Auto Program general manager accountable for strategic partnerships.
That volume, like that of lots of Costco’s products, is lots. It amounts to at the very least 3% of all vehicles sold within the U.S. every year and greater than the annual sales of enormous publicly traded dealer groups reminiscent of Lithia Motors and AutoNation.
GM declined to reveal what number of Costco customers have purchased GM vehicles through this system.
EV interest
A growing number of car sales made through Costco Auto are of electrical vehicles, Costco said. About 7% of member requests for vehicles to Costco Auto were related to electric vehicles in 2023, based on Maxwell.
“Our membership has all the time liked latest things, and EVs are absolutely latest to the marketplace,” Maxwell said. “That is a terrific way for the [automakers] to market and get their EVs out in front of people who have an interest. Costco has a really strong demographic that matches well with EV buyers.”
Along with GM, Costco Auto has partnered with Volvo, including its Polestar EV startup brand, Audi and others through the years.
GM’s 2024 Chevrolet Equinox EV during a media launch event for the vehicle in Detroit, May 16, 2024.
Michael Wayland / CNBC
Costco Auto partners with automakers reminiscent of GM to supply nationwide discounts along with separate partnerships with greater than 3,000 franchised dealers from across the U.S., which it calls its “On a regular basis Auto” program, Costco said.
The sweeping discounts from automakers might be used at any franchised dealer, or Costco will suggest a partner dealer where shoppers can work with a Costco Auto-trained worker, the retailer said.
Such dealers have specially trained employees who’re knowledgeable of all available incentives and offer haggle-free pricing that is competitive with their market, Maxwell said.
“It has a pre-negotiated price already established that we work with the dealer every month to be sure that it’s updated and it’s market competitive,” Maxwell said. “You realize the value goes to be a terrific price since you’re getting it through Costco, and you’ll be able to really concentrate on and revel in 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 along with some other company or dealer incentives, Maxwell said.
“There’s some pretty strong incentives happening out there for EVs without delay, in order that they get that additional value on top of it,” Maxwell said. “It really makes it a compelling offer to anyone who’s considering an EV.”
The customarily-steep price point on all-electric vehicles has proven to be a hurdle to mass adoption. Industry executives reminiscent of 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 typical transaction price for electric cars within the U.S. was $55,242 as of April. That is a greater than $10,000 premium in comparison with gas-powered vehicles, based on Cox.
The Costco member incentives typically last between 60 and 90 days, and members can also receive other deals on pre-owned vehicles, maintenance and repair, based on Costco. Participating retailers are currently offering 15% off auto repair, as much as $500 off.
Costco customers
Dealers and automakers that partner with Costco Auto also get to leverage Costco’s fame and consumer experience. GM has been a Costco Auto partner within the U.S. since 2011 and in Canada since 2019.
“What do you already know about Costco? You realize that they stand behind their product. You realize that you’ll get a great value,” West, herself a Costco member, told CNBC. “I think that the Chevrolet brand especially has great synergy with Costco.”
Costco members are largely made up of suburban and concrete households, and 58% are between the ages of roughly 42 and 59, based on 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 typical retailer — and 46% making between $40,000 and $125,000.
Chevrolet Blazer EV on display on the Latest York Auto Show, April 6, 2023.
Scott Mlyn | CNBC
Buyer age and income are each key demographic considerations for automotive firms reminiscent of GM which might be working to get more EVs within the garages of American drivers.
Costco shoppers are also very loyal and like the retailer over many other stores, based on global marketing data and analytics firm Kantar.
“Costco’s members are extremely loyal to Costco,” Julie Craig, vp of shopping insights at Kantar, said in an announcement. “These members feel that the savings they receive through their memberships offsets the membership fees, and that Costco offers them value beyond what they’ll get at other stores.”
Automakers in addition to associated dealers pay Costco Auto a subscription fee, largely to cover marketing and promoting for the vehicles, Maxwell said. He declined to reveal subscription costs for the businesses.
The Costco Auto Program was initially a part of wholesale competitor Price Club, which merged with Costco in 1993.
– CNBC’s Melissa Repko contributed to this text.
