GM EVs at Costco Auto are helping to drive electric vehicle sales

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

The Detroit automaker said it is increasingly utilizing the electric car retail giant's Costco Auto Program 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 very bullish on Costco because I like their brand,” said GM North America President. Marissa West told CNBC during a recent interview. “I encourage the team to see how we can build this partnership.”

West sees electric cars as a “huge opportunity” to expand GM's reach with Costco's more than 50 million members in the US. The automaker is also the exclusive automotive partner for Costco Auto in Canada.

Automakers such as GM, Ford engine And Volkswagen have shifted their electric vehicle strategies in recent months in an effort to boost sales and make long-elusive profits on the vehicles. Brands have relaxed all-electric messaging, turned to hybrid vehicles as a bridge to adoption, and built charging partnerships to boost consumer confidence in the market.

An intermediary like Costco, which has a robust customer demographic for new car buyers, could help move electric vehicle sales.

Costco Auto, a third-party wholesale service, does not sell the vehicles, Costco said. Instead, it acts as a facilitator or partner for franchise dealers and automakers such as GM, offering Costco members special prices on its vehicles through rebates and other incentives, the retailer said.

Costco Auto has facilitated an average of more than 500,000 vehicle sales per year over the past five years, said Jay Maxwell, general manager of the Costco Auto Program, 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 US each year and more than the annual sales of major publicly traded dealer groups such as Lithia Motors And AutoNatie.

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

A growing number of car sales through Costco Auto are for electric vehicles, Costco said. According to Maxwell, approximately 7% of member requests for vehicles to Costco Auto in 2023 were for electric vehicles.

“Our membership has always loved new things, and electric cars are definitely new to the market,” Maxwell said. 'This is a great way for the [automakers] to market their EVs and bring them to the attention of interested people. Costco has a very strong demographic that fits well with EV buyers.”

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

Costco Auto partners with automakers like GM to offer nationwide discounts, in addition to separate partnerships with more than 3,000 franchised dealers from across the U.S., what it calls its “Everyday Auto” program, Costco said.

The deep discounts from automakers can be used at any franchised dealer, or Costco will introduce a partner dealer where shoppers can work with a Costco Auto-trained associate, the retailer said.

Such dealers have specially trained employees who are aware of all available incentives and offer bargain-free prices that are competitive with their market, Maxwell said.

“A pre-negotiated price has already been established and we work with the dealer every month to ensure it is up to date and market competitive,” Maxwell said. “You know the price is going to be a great value 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 for the Equinox, Blazer and Cadillac Lyriq EVs through July. The Costco-only rebate is in addition to any other corporate or dealer incentives, Maxwell said.

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

Costco member benefits 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 repairs, up to $500 off.

Costco members are largely made up of suburban and urban households, and 58% are between the ages of 42 and 59, according to Counter. The market research firm reports that Costco members also tend to be wealthy, with 35% of members making more than $125,000 – 25% more than shoppers at the average retailer – and 46% making between $40,000 and $125,000.

The buyer's age and income are both important demographic considerations for car companies like GM, which are working to get more electric cars into the garages of American drivers.

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

“Costco members are fiercely loyal to Costco,” Julie Craig, vice president of Shopping Insights at Kantar, said in a statement. “These members believe that the savings they receive through their memberships offset the membership costs, and that Costco offers them value above and beyond what they can get at other stores.”

Automakers and affiliated 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 a wholesale competitor Prize clubwhich merged with Costco in 1993.

– CNBCs Melissa Repko contributed to this article.