Will EVs Destroy the Auto Dealership?

By · November 13, 2012

Tesla store

Automakers Tesla Motors and CODA Automotive both operate company-owned showrooms, which are not being called “dealerships,” and which offer the ability to see, touch and feel vehicles, as well as order the vehicles. Tesla vehicles are delivered to consumers’ homes. Telsa claims this means these are not technically dealers, while CODA does have dealers in the traditional sense. Similar to what we’ve seen before, traditional auto dealers are not buying Tesla’s distinction and legal battles are sure to follow.

This is a bit of déjà vu from the late 1990s, when car dealers felt threatened by companies trying to sell cars directly online. This episode resulted in a strong response from auto dealers and legislated monopolies for dealers, under which particular dealers have exclusive rights to sell particular manufacturers’ vehicles in certain regions or cities. This regulatory environment still exists today, including in Telsa’s home state of California.

Going back even further, to the early years of the automobile, vehicle manufacturers sold off their company owned dealers to avoid anti-trust suits from the government. This has been the basis for complaints from auto dealers regarding any new perceived threat, whether Internet-based or manufacturer-based. Let’s be clear on one thing: the current auto dealer business model is not going anywhere soon. Auto dealers provide significant employment and political support in the United States, so it’s a near impossibility that the model will be demolished by a government or court ruling. However, a consumer shift seems likely to have a bigger impact on the dealership model. Tesla claims that it is not challenging the current dealer franchise laws so much as capitalizing on a unique marketing opportunity. Whether that distinction matters seems likely to be answered by state courts, rather than public opinion.

A New Retail World

Dealers do provide key important services within the new vehicle purchase process. They’re responsible for final inspections and detailing of vehicles for delivery and customer education and service during and immediately after sale. As a manufacturer, Tesla is taking on a much bigger role and is likely to see strong support from consumers. After all, what consumer wouldn’t want home delivery of vehicles, assuming inspections, education, and customer service are delivered with the car? Whether Tesla can truly deliver these services with a vehicle will prove whether the Tesla business model has long-term merit.

Still, I wouldn’t be surprised if some states (particularly Texas) force changes to Tesla’s current store model. At the same time, Tesla may be paving the way for a bold new world in automotive retailing.

Dealers are fighting what seems to be more of a consumer shift than simply a manufacturer skirting franchise laws. The early adopters of EVs are young, wealthy, highly educated, tech savvy, and disinclined to put up with the haggling of the traditional auto-buying experience. They want a more exclusive and customized experience than most dealers are delivering. Dealers will have to recognize this (some already do), and I anticipate in another 15 to 20 years the dealer experience may shift toward something more similar to Costco’s model. Costco works with a marketing firm and sells a manufacturers’ vehicle for a marketing fee or commission per vehicle sold, and the marketing firm then works with a dealer for ordering and delivery of the vehicle. I don’t expect this shift will be smooth, but if the prognosticated long-term shift away from vehicle ownership holds true, dealers and individual state dealer laws are in for a shake-up whether they come along quietly or kicking and screaming.

Comments

· Anonymous (not verified) · 1 year ago

I hate dealerships. The only times I set foot is to actually *buy* a car (but I never pay more than invoice) or to get warranty work. I get all my personally funded services at independent shops, and I avoid dealership interaction in every way possible. I hope dealerships go the way of the dodo.

· · 1 year ago

I just had a conversation with a friend about bad experiences with car dealers and car salesmen. I truly believe there are a significant percentage of car salesmen who are borderline psychopaths and I'M NOT JOKING. I've NEVER felt comfortable buying a new or used car from a dealer.

· Bret (not verified) · 1 year ago

When I bought my F-150, the salesman was so obnoxious that I walked out of the local dealership and bought a used truck off of the Auto Trader.

· Anonymous (not verified) · 1 year ago

As a salesmen I can say that most clients have no idea what they want. While the people on this website come in and do their research before hand.
We have had many discussions about this topic. I would expect most people still need to bang the metal and feel a car. That being said more and more people are using things like true car(really a company called ZAG) for pricing. The problem comes up is not many have a clue about the car they put in.
I think everyone in the car industry would LOVE to have just one pricing like they did at Saturn or in other countries where you are not allowed to sell a car different the sticker price). How wonderful it would be to just pair a person with the best car for them and then say here is the price. Everyone would know the rules. The problem is nobody will ever trust anyone.
That being said if you think car prices are hidden. Try the garment industry and I hope you never go to a place like Macy's again.

· · 1 year ago

Yeah, there is a ton of hidden mark-up in garments. But then I rarely spend $30k on a garment.

If my $60 shoes suck it is pretty simple to replace them. I have a lot more options and a lot more flexibility and a lot more wiggle room with price. My $60 shoes don't have much of an on-going cost, require little maintenance or warranty work, and no insurance or license to operate.

Dealerships brought this on themselves.

Also, your comment "As a salesman I can say that most clients have no idea what they want" completely epitomizes why people don't like salesmen.

· Anonymous (not verified) · 1 year ago

I think the problem for offline retailers of all types is that their business model is dead. In the past, retail stores (or dealerships in this case) were the only place you could (a) find products (b) compare products (c) test products (d) buy products.

Today, a, b and d can all be done at home on the internet. a and d can be done much better online than offline. What offline retailers are bound to become are showrooms for playing with and testing products, and learning about them. Apple started this trend with their Apple Stores, where the focus is more on delighting customers, and showing them and teaching them about Apple products than selling them stuff. Instead of selling, they let you use the products themselves. This is the model Tesla is following.

Eventually, almost all B&M retail stores will have to shift to this model. Their problem is the transition will be unbelievably hard.

· Anonymous (not verified) · 1 year ago

Not at all.

Most people will go for Plugin since its the best of EV & Hybrid. Only some will buy Electric vehicles.

· Chris A. (not verified) · 1 year ago

No.

http://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines

· · 1 year ago

I hate car dealerships in general. They are hard sellers with 1949 style marketing where a salemen cannot give you the price and specification of the car before one minute. Often even after half an hour you won't have a final price. Even if you go there with cash, you cannot buy the car on the same day. Their system have been bought in the past by big banks, so it's the bankers that try to hack you on everything, dubious lease contract, extras and special treatment, gimmicks of all kind, costly servicing, etc.

I bought a small chrysler in 2005 for cash and it took two days and hours and hours and i never returned to that dealership for any service or inspection. I did most of the maintenance myself and this car was cheap fortunatly but as most car it is afflicted by high gas consumption and chrysler put their consumers in the hand of big dirty costly oil where they constantly increase the price of the gasoline you need.

Try to postpone and avoid any expenditures toward chrsler, gm , car dealerships and big oil indefinatelly till someone start to sell a cheaper, better car then actual green and conventionnal cars on the market now. If your car consume gasoline, try to get a low cost used well maintain SMALL car and use it till it's completly wornout then buy another used small car. Maybe there will never be a real efficient car on the market with a cheap price but a least you can save a maximum of money with the neanderthal cars actually sold worldwide where big oil and actual car manufacturers are making billions with outdated costly polluting gasoline technologie and unsastisfactoring costly weighty green technology.

· Anonymous (not verified) · 1 year ago

At Valkraider.

I am telling the total truth. People walk in and don't know if they need an SUV or a sedan. How much they can afford or any idea of a credit rating.
That to me is someone without any idea of even the product that they are looking to get or if they can afford it. When I bought my car I waited until the numbers fit for the car I needed.

You also have to be ready to actually buy the car. Most salesmen are going to try to sell something to you because most people don't come in ready to actually buy. Like the reason for all spam mail... it is still done because it works to sell things. When the people change the industry will change with it.

At Gorr,
Price is the hardest thing and as I said would love not to even have to bring it up. Some are honest customers though. They come in (I am at a higher line dealership) say I am looking for a car at 250 a month with 2k TOP. I say its not possible and we part ways.

Some customers want to see you bleeding. As it sounds most want here.

People want to keep things from you for no reason sometimes. We have had people who wouldn't say what they were driving even though we tell them that it could save them $1000. They wouldn't even need to trade in the car.. just need to know what they are driving.

If you couldn't buy the car on the day with cash(not personal check) in hand, then the dealership was stupid. If I have the car and can give it to you that day you would be usually done about 1 hr after we have come to an agreement for a price.

Buying something you want and comfortable with is the most important thing. You want that sweater and you then can make the choice in your head if that is product is worth buying.

· Anonymous (not verified) · 1 year ago

If Tesla is forced to use dealerships in a particular state I hope they ADD the dealers cut to the direct price so that people can clearly see the "advantage" that dealers (don't) provide when purchasing a car...

If the dealerships were being honest about unfair competition then they'd be complaining that they are not going to be able to get a part of the SERVICE business too...

· Anonymous (not verified) · 1 year ago

The problem is when there is a defect in your car who do you send it back to. The dealer won't touch it since he was not the seller. You do get a point of service with a dealer when you buy at one. Also who takes care of the states paper work. You won't be able to do that online.
Each also state has different rules.
example. A NJ company can lease a car with multiple security deposits to someone in NY state. Someone in NY state can not use multiple security deposits.
Then the question is how does the dealership make money. Only reason a business is around is to make money.
As most dealerships are being forced to the major highway areas for exposure the cost of land in those areas goes up.

Only way I see that you could keep a dealership network is to have a delivery fee for that location. You would have to go to the location and maybe pay for driving the car, or else they would have to be paid by the parent company. ]

Also think of where the money goes. A dealership buys or finances the cars from the manufacturer . Once the car has arrived at the dealer they have to payup. If the cars were not at the dealer then the manufacturer has to have really really deep pockets to keep the cars at one location. Not even getting into the cost of transporting one car at a time to a dealer or the customer who wants it right now and now has to wait.

· · 1 year ago

@Anonymous (car salesman),

The trouble I've had with dealerships is that they are ALWAYS behind the times on the new technologies. Case in point - when I went to Nissan to test-drive the Leaf, the salesman kept referring to the "degenerative breaking". I'm not sure what that would be, but it's probably not good. I drove in with a hybrid, and that little bit of experience alone put me light-years ahead of the salesman (who was specifically trained on the Leaf) in terms of how electric motors and batteries work in cars. Interestingly, when I bought my hybrid, the Honda dealer had the same problem. And Honda had been selling hybrids in the US for 10 years!

As a consumer, I never get the feeling that a dealership has any interest in helping me out. Like has been said, they're in business to make money, the customer be damned! And as long as they have no competition, they continue to get away with it.

On the topic of competition - Gorr, while I agree with buying used and keeping them around, that doesn't solve the dealership problem at all. When you replace one used car with another, that car was still originally purchased new through a dealership. There is just no other way to buy it right now. Isn't that what we call a monopoly?

· kimberlyjoseph (not verified) · 1 year ago

I must say a very well compiled post on the important legal, financial and operational preparations that a car wash startup needs to take before it launches. Once start-ups do get finished with all these activities, there is another big challenge waiting for them and that is to get noticed, get the word out to gain visibility, and win clients and retain them.

Ask any successful business startup and they will tell you, the first stride towards success starts with creating a corporate identity – knowing your target audience very well and then composing a message that speaks uniquely to them. And the first creation of that attempt is almost always a professional logo.
Displaying your logo, company name, message (tagline) and contact information near a busy road, lawn signs, on your car window decals or door, business card and flyers will quickly introduce your business to targeted customers for a very small investment. Exhibiting the logo on all forms of signage will facilitate the community to remember the service you provide.

Having a good logo is essential, especially when using it on signs. Speaking of good logos, click below link to view few eye catching car wash logo design ideas I found during the research for writing a blog post for a client.

http://www.logodesignconsultant.com/logo_design_gallery/Car-logo.html

I am in no way endorsing or promoting the website but it is quite attractive because of the colors it has used in car business logos. Also, the company has categorized the car wash logos according to the genres of the business.

· · 1 year ago

The real threat to dealerships with the electrification of the automobile is the minimum amount of service and warranty work that will be required for BEV's. Most dealers live on the service revenues.

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