GM EVs at Costco Auto help boost electric vehicle sales

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

The Detroit automaker said it is increasingly using the retail giant's Costco Auto program for electric vehicles as it expands its portfolio of specialty vehicles into mass-market segments with vehicles like the Chevrolet Equinox and Chevrolet Blazer EVs.

“We have a great partnership with Costco, and I'm really bullish on Costco because I love their brand,” Marissa West, president of GM North America, told CNBC during a recent interview. “I encourage the team to see how we can build this partnership.”

West sees electric vehicles as a “huge opportunity” to expand GM's reach with Costco's 50 million-plus members in the United States. The automaker is also the exclusive automotive partner of Costco Auto in Canada.

Automakers such as GM, ford motor And Volkswagen They have been changing their electric vehicle strategies in recent months in an attempt to boost sales and achieve long-elusive profits on the vehicles. Brands have toned down the all-electric messaging, turning to hybrid vehicles as a bridge to adoption, and striking charging partnerships to boost consumer confidence in the market.

A broker like Costco, which has a strong customer demographic of new car buyers, can help move the needle for electric vehicle sales.

Costco Auto, a third-party service for the wholesale retailer, does not sell vehicles, she said. Instead, it acts as a facilitator or partner for franchise dealers and automakers like General Motors, offering Costco members special prices 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.

This size, like many Costco products, is extra large. It amounts to at least 3% of all vehicles sold in the United States each year and more than the annual sales of large, publicly traded dealer groups such as Lithia Motors And Automatic nation.

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

An increasing number of vehicle sales made through Costco Auto are electric vehicles, Costco said. About 7% of member orders for vehicles to Costco Auto were related to electric vehicles in 2023, according to Maxwell.

“Our members have always loved new things, and electric vehicles are completely new to the market,” Maxwell said. “This is a great way for automakers to market their electric vehicles and get them in front of interested people. Costco has a very strong demographic that matches well with electric vehicle 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 General Motors to offer nationwide discounts as well as separate partnerships with more than 3,000 franchised dealers from across the U.S., which it calls the “Everyday Auto” program, Costco said.

The retailer said blanket discounts from automakers can be used at any franchised dealer, or Costco will suggest a partner dealer where shoppers can work with an automatically trained Costco employee.

These dealers have specially trained staff who are familiar with all available incentives and offer bargain-free prices that are competitive in their market, Maxwell said.

“We already have a pre-negotiated price set and we work with the agent every month to make sure it is up to date and is 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 on and enjoy the buying experience.”

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

“There are some very strong incentives going on in the electric vehicle market right now, so they get that extra value on top of that,” Maxwell said. “That's really what makes it a compelling proposition for anyone considering buying an electric vehicle.”

The often prohibitive price point of fully electric vehicles has proven to be an obstacle to mass adoption. Industry executives, such as GM CEO Mary Barra, have noted that pricing along with charging infrastructure and consumer education are contributing to the slower-than-expected pace of electric vehicle sales.

Cox Automotive reported that the average transaction price for electric vehicles in the United States was $55,242 as of April. That's $10,000 more than gas-powered vehicles, according to Cox.

Costco member incentives typically last between 60 and 90 days, and members can also get other deals on used vehicles, maintenance and service, according to Costco. Participating retailers are currently offering a 15% discount on auto repairs, up to $500.

Dealers and automakers who partner 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 know they stand behind their product. You know you're going to get good value,” West, a Costco member, told CNBC. “I think the Chevrolet brand in particular has great synergy with Costco.”

Costco's members are largely made up of suburban and urban households, with about 58% between the ages of 42 and 59, according to Numerator. The market research firm notes that Costco members are typically wealthy, with 35% of members making more than $125,000 — 25% higher than shoppers at the average retailer — and 46% earning between $40,000 and $125,000.

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

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

“Costco 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 membership more than offset the membership fee, and that Costco offers them value beyond what they can get at other stores.”

Automakers and their associated dealers pay Costco Auto a subscription fee, largely to cover marketing and advertising for the cars, Maxwell said. He refused to disclose subscription costs for companies.

Costco's drive-thru program was initially part of wholesale competitor Price Club, which merged with Costco in 1993.

— CNBC's Melissa Repko contributed to this article.