The way I see it is that the dealership model is actually a preservation of free market capitalism. The consumer benefits because he/she has the ability to shop around for the product they want at the price they feel most comfortable paying, and the franchisees/businesses benefit because they stay in business.
The alternative will result in what you see with health insurance. A few big corporations who dictate pricing and consumers have very little to no choice on how much they have to pay. Literally the antithesis of free/fair market pricing. Competition makes the world go round. Manufacturers compete against each other but it’s even better when dealers for the same manufacturer compete against each other.
So, basically leaving all in the hands of a middle man? But the market will determine what the cars sell for anyway. Volvo can keep the same MSRP or drop it. Volvo actually was mulling this idea a couple of years ago, but their dealers were not happy about it. So there must be a reason for them to do it. But it doesn’t mean consumer would win lol
I agree with SD getting 0 or close to it but assumption that manufacturer will keep the larger margin for themselves vs passing some or all to the buyer is debatable, especially in competitive segments.
I personally feel the mean will go lower (how much is debatable) and leasehackrs needing to find a new religion.
Wouldn’t allowing both direct to consumer and dealership models allow us the best example of the free market and see what consumers ultimately prefer in the end?
It exists. BMW and MB Manhattan are both corporate owned. But I can bet you manufacturers typically don’t want to compete against themselves. There must be a reason why the only corporate stores for these brands are in NYC and not anywhere else. Unless I am wrong about that?
And let’s also remember that the franchise model works for many other industries as the preferred means of distributing products. Transferring risk onto franchisees and maintaining a degree of control while they cash royalty checks.
Ask a dealer how fun it is when corporate forces them to renovate, or take on a ton of hard to sell inventory. No perfect business model and the capital expenditures required to maintain a national footprint aren’t cheap. Tesla had the stock price and forgiving investors that allowed them to built it out. Not so sure any legacy players would have the same advantage.
But still comes back to the theme that the businesses should make the determination of to distribute their product.
There is a somewhat smaller scale to this with eBikes.
There is a group that prefers to support local bike stores that are partnered with certain brands and they frown on D2C brands.
But some of the D2C brands are smart and for any service/warranty work, they compensate the consumer for the the cost for any repairs at a bike store (since most work is more mechanical than electrical) and it’s a win for the consumer as they have a local turnaround and for the bike store as they get paid whatever their repair cost was.
It’s like this for many consumer products… Apple sells products direct and there is also a dealer network that sells and services their products.
Sure, Tesla doesn’t really allow this… yet… although I think for glass replacement, Safelite is an approved repair vendor.
What I don’t understand is why local/state governments would block D2C. People still like to buy from a dealership no matter how many blessings they add.
I believe the dealership model is as inefficient and as anti-consumer friendly as can be but it’s what allows for deal hunting because you have to have the stomach and resiliency for it which 95% of car shoppers who walk in the door don’t have and the 5% that do have it get rewarded.
At the end of the article it also mentions Braman (big dealership group in FL) donating money to the lobby. Norman Braman is a billionaire with a lot of political pull and many of the big dealership guys in FL are the same. Would not be politically smart to mess with them from a politician’s perspective.
What about the rest of the ownership experience? Parts and service?
Are we discarding every story where someone had an issue with their car, the OEM told them to pound sand, and a dealer intervened on their behalf and got it resolved?
You might be correct but the Manhattan market with ~ 2 million in population with higher than average income does not consist of those that are typically haggling on price. My attempts with Manhattan Benz and BMW when trying to negotiate with them has largely been met with the same response. “We don’t need to sell to you at any discount when we will have 5 other buyers jump on this car at MSRP+ before the end of the day”. Overhead definitely high there buy overall margins are also much higher I would think.
Also plenty of money to be made on service since so many people who commute to the city for work drop off their cars for service there for convenience.
That was partially my point. Selling a lot of new cars at sticker (yet relatively few used cars) is a terrible business model.
Any dealer would rather sell a ton of used cars, because its way more profitable, but there’s nowhere to store such inventory in Manhattan. And the prime demographic wants new cars anyway.
Small footprint with mainly orders (such as Porsche and exotics) is different but neither BMW nor MB can do that. It’s the reason many brands don’t even exist in a Manhattan location.
TLDR sometimes the relationship between demographics and profitability is quite counter intuitive.
