Costco is GM's secret to selling its new EVs.

• The Chevrolet Equinox is being used by GM as part of its Costco Auto Program for EVs as the automaker expands its portfolio to mass market segments.
• Costco partners with franchised dealers and automakers, including GM, to provide special pricing on vehicles to members through discounts and incentives, the company said.
• On average, over the past five years, Costco Auto has enabled more than 500,000 vehicle sales annually.

Detroit has a secret weapon for enticing U.S. consumers into its new electric vehicles: incentives.

The automaker in Detroit is expanding its portfolio from niche vehicles to mass-market segments by increasingly using Costco Auto Program for EVs, including the Chevrolet Equinox and Blazer EVs.

""I am really bullish on Costco because I like their brand, and I am encouraging the team to build our partnership," said Marissa West, GM North America President, during a recent interview with CNBC."

GM views EVs as a "huge opportunity" to expand its reach with Costco's 50 million members in the U.S. Additionally, GM is the exclusive automotive partner for Costco Auto in Canada.

In recent months, automakers such as GM and have been modifying their electric vehicle strategies to increase sales and finally achieve profits on these vehicles. Brands have shifted away from all-electric messaging, embraced hybrid vehicles as a stepping stone to adoption, and formed charging partnerships to enhance consumer confidence in the market.

Costco, with its customer demographic of new vehicle buyers, could aid in increasing EV sales.

Costco Auto, a third-party service of the wholesale retailer, does not sell vehicles. Instead, it acts as a facilitator or partner for franchised dealers and automakers such as GM, providing Costco members with special pricing on vehicles through discounts and other incentives, the retailer stated.

Over the past five years, Costco Auto Program general manager Jay Maxwell has stated that the company has facilitated more than 500,000 vehicle sales annually on average.

The volume of that product is significant, as it accounts for at least 3% of all vehicles sold in the U.S. annually, surpassing the annual sales of large publicly traded dealer groups such as CarMax and AutoNation.

GM refused to reveal the number of Costco customers who bought GM vehicles through the program.

EV interest

In 2023, electric vehicles accounted for 7% of member requests for vehicles made through Costco Auto, the company said.

"Maxwell stated that our membership enjoys new things, and EVs are a completely new addition to the market. This is an excellent opportunity for automakers to advertise and showcase their EVs to people who are interested. Costco's strong demographic aligns well with EV buyers."

Over the years, Costco Auto has formed partnerships with various brands, including Volvo, Polestar EV, and Audi, in addition to GM.

Costco Auto collaborates with automakers, including GM, to provide nationwide discounts, in addition to its "Everyday Auto" program, which partners with over 3,000 franchised dealers across the U.S.

Automakers' sweeping discounts can be used at any franchised dealer, or Costco will recommend a partner dealer where customers can work with a Costco Auto-trained employee, the retailer stated.

Maxwell stated that these dealers have employees who are trained to know all incentives and provide pricing that is competitive with the market, without any haggling required.

"Maxwell stated that Costco has a pre-negotiated price that is updated monthly with the dealer to ensure market competitiveness. He emphasized that the price is already established and customers can focus on the buying experience without worrying about price fluctuations."

Currently, GM is providing Costco members with a $1,000 incentive "certificate" on the Equinox, Blazer, and Cadillac Lyriq EVs through July. This discount is exclusive to Costco members and is in addition to any other company or dealer incentives, Maxwell stated.

"Maxwell stated that there are currently strong incentives in the market for EVs, which adds to their value and makes them a compelling offer for those considering them."

The high cost of all-electric vehicles has been a barrier to widespread adoption, according to industry leaders such as GM CEO Mary Barra, who cited pricing, charging infrastructure, and consumer education as factors contributing to slower-than-anticipated sales of EVs.

According to Cox Automotive, the average transaction price for electric cars in the U.S. was $55,242 in April, which is a more than $10,000 premium when compared with gas-powered vehicles.

Costco member incentives usually last between 60 and 90 days, and members can also take advantage of other deals on pre-owned vehicles, maintenance, and service. Currently, participating retailers are offering 15% off auto repair, up to $500 off.

Costco customers

Costco Auto partners with dealers and automakers to utilize its reputation and consumer experience. GM has been a Costco Auto partner in the U.S. since 2011 and in Canada since 2019.

"West, a Costco member herself, told CNBC that she believes the Chevrolet brand has great synergy with Costco. She added that Costco stands behind their product and that customers can expect to get good value."

According to Numerator, Costco members are predominantly suburban and urban households, with 58% falling between the ages of 42 and 59. The market research firm reports that Costco members are typically affluent, with 35% making above $125,000, which is 25% higher than the average retailer's shoppers, and 46% making between $40,000 and $125,000.

American car companies, including GM, must take into account buyer age and income when aiming to increase the number of electric vehicles in American households.

Kantar's global marketing data and analytics reveal that Costco shoppers are extremely loyal and choose the retailer over many other stores.

"Julie Craig, vice president of shopping insights at Kantar, stated that Costco's members are extremely loyal due to the savings they receive through their memberships and the value they get beyond what they can find at other stores."

Maxwell stated that both automakers and their dealers pay a subscription fee to Costco Auto, primarily for marketing and advertising purposes. He refused to reveal the specific costs for these companies.

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

– CNBC's Melissa Repko contributed to this article.