General discussion for curiosity’s sake: What are your thoughts on Tesla and Rivian’s sales model, direct to consumer with the same pricing for all versus the traditional dealership model where anything goes? No unnecessary negotiations, added nonsense fees and so on. The price is the price.
To be clear, I consider the brokers on here a different model in itself, with clear, transparent deals posted for review, no nonsense. I am just exhausted with the nonsense each dealer sells you. I appreciate the brokers and what they do, it is a game changer in my mind.
Does anyone see a world where the franchise dealer model goes away?
It will not go away with how dealership owners usually hold local politics hostage via political funding and tax revenue. You would think Republican states like Texas would welcome free market competition but instead passed laws to protect the existing dealership networks.
There are plenty of one-price dealers out there for both new and used. The problem for them is that people will buy elsewhere if a dealer that negotiates will sell it for $100 less, so it is a failing business model IMO.
But to answer your question, no I don’t see a world where the franchise model disappears completely.
Right now, OEMs sell 15+ million cars to 17k dealers and get paid once the cars are shipped to the dealer. Doesn’t matter how long it takes for a car to sell or what the market is, they are paid in full. So why would a manufacturer, who is selling in bulk without overhead, now want to sell every car 1 by 1 while tying billions of dollars worth of overhead in inventory and staff that could be used elsewhere? That isn’t to even mention how much it would cost to buy out their current dealer network.
I can see a world where big companies buy up local mom/pop dealers, close smaller locations, and move to a big center with 1 price. And if people want a more straightforward experience, then reward the dealers who do that with a sale and don’t buy from those that add nonsense fees, packages, etc.
I did not know that the dealers pay for the cars at delivery, which makes a lot of sense of course. Room for multiple experiences at the end of the day per your comment above
The legacy OEMs cannot legally exit their franchise agreements and start selling directly. So it’s moot whether they want to be come DTC sellers or not.
I don’t see dealers going away. What will happen is consolidation. More Walmart sized dealership groups. More consistent pricing and fewer staff. I see the CarMax model working well… here’s our price today please come in and buy it. The inefficiencies of a dealership with a dozen salesmen with nothing to do will go away. It’s capitalism at its best. We optimize and reduce waste
Except they do in certain states and locations where they can (I.e MB of Manhattan). Ford has repeatedly said they want to do DTC with BEV, and just let the dealers be the pickup location/service shop. But I don’t think they’ve fully worked out the logistics yet….
I do think one of the reasons why Tesla has crazy margins is because they’ve cut out the middle man (dealer). No one to share profits with, no dealer F&I person to incentive, etc.
Private car ownership prob has 15 years left at the rate we’re going, could be less imo. In that time not too much will change. Big guys will swallow the small ones, many owners of dealerships are older and/or 2nd generation and won’t pass on that cash out. For now we’re all here on leasehackr for a reason and we know the competitive dealership model is why we get the deals we do.
That is not why they have the margins they do…it was from a mix of timing, great marketing, and govt tax credits. Those margins are getting smaller and smaller now
Economies of scale. Capitalism is optimizing the best use of capital which to me is large scale everything. Technically, Capitalism is solely about private ownership.
You are denying the fact that Fremont produces the most cars in the US. Tesla ramped up heavily and cut costs. EVs are simpler to manufacture and when batteries get cheaper (who knows) the prices should fall even further and every carmaker should be cranking out 8-9K cars a week from each factory.
Companies exist to reduce transactional costs but there’s a limit where a smaller company can be more agile and the larger company hits its threshold due to size. That limit is when adding another employee costs more then they’re worth.
That’s when they seek protections from govt in the form of regulations to skew it. Making the cost for small firms to join the market too high
True capitalism would never allow these mega corporations.
I see some people very optimistic about direct to consumer, but I don’t see that happening anytime soon. I think others covered the primary reasons. But personally I don’t see this as a great thing. I see folks repeating this fantasy that prices will be cheaper for everyone if we remove dealers from the equation. And perhaps for the masses it will be better, because dealerships definitely suck. But there will no longer be great deals for a car.
