Tesla Can Topple the Car-Dealer Monopoly

http://www.bloombergview.com/articles/2014-03-20/tesla-can-topple-the-car-dealer-monopoly

by adventured • 12 years ago

293 184 12 years ago

beat• 12 years ago

This is something I think a lot of people don't get about Tesla's state-by-state fight with the dealer networks. It's not about hating on electric cars. It's about the threat that Tesla's model poses to their entire industry. Frankly, Ford doesn't need its dealer network any more than Tesla does now, or they shouldn't. They could go to the same shop-online and drop-ship model, and cut out a middleman. If any of the major automakers start killing dealers, the whole industry will die, and quickly.

Why? Because they're parasites. The dealer network evolved to solve distribution problems from 100 years ago. It makes zero sense as a business model in the 21st century. "Ripe for disruption", as we'd say in these parts. All they have is inertia, deep political connections, and a century of regulatory mazes. But those are three very big things to have.

Still, they're fighting a defensive war. They will lose. The question is only how quickly, and at what cost to consumers?

rdudek• 12 years ago

Agreed! Wish I could afford a Tesla car, maybe one day I will. But I always look forward to see what else they're doing. Got to hand it to Tesla for disrupting the standard industry.

hardwaresofton• 12 years ago

I agree -- I think this article should have been named "Tesla will topple the car dealer monopoly".

The entire dealership system represents a market inefficiency that will correct itself. The only forces that are keeping the monstrosity around are broken political systems and force (physical or otherwise) paramount to coercion.

bluedevil2k2• 12 years ago

I wouldn't be so dismissive of dealers by simply saying "They will lose." The most important thing in American politics is power, and power comes from money (sounds like that comes directly from House of Cards). The article points out that the car dealer lobby is well funded and powerful. It even points out that they are exempt from the Consumer Protection laws, meaning they don't have to disclose the awful interest rates they are offering (which surprised me). Look at the size of a company like AutoNation ($6.3B market cap). They aren't a local mom and pop car dealer. Never underestimate the fight of a wounded animal backed into a corner.

rayiner3• 12 years ago

So less than half the purchase price of WhatsApp? These are the deep pocketed interests on the other side of the battle?

stcredzero3• 12 years ago

The most important thing in American politics is power, and power comes from money

Since most American legislators come from a legal background, the culture of national politics has this world view. Chinese leadership is majority engineering, so at least they have some sense that physics isn't impressed dollars and poll results.

Shivetya2• 12 years ago

We have to be careful here, while I am all for Tesla being able to sell their cars where they want I want assurances I can get their car and any other car serviced where I want.

Car dealers and independent auto service centers need protection from manufactures; dealers can service brands they don't sell should they choose.

The danger in allowing manufacturers to determine how sales are made is they will likely dictate how repair and maintenance is handled. While maintenance on an electronic vehicle is going to be significantly different my warranty should not be affected should I choose someone other than the manufacturer to repair it.

disclaimer, I work for a leading supplier of auto parts.

gergles• 12 years ago

Magnusson-Moss already prevents manufacturers from denying your warranty based on who does the service. We don't need protectionism for the dealerships.

hueving• 12 years ago

We have to be careful here, while I am all for Tesla being able to sell their cars where they want I want assurances I can get their car and any other car serviced where I want.

Those are two completely separate topics. The fact that dealers now service cars has nothing to do with the fact that they sell them. Otherwise auto repair shops wouldn't exist.

300bps• 12 years ago

The danger in allowing manufacturers to determine how sales are made is they will likely dictate how repair and maintenance is handled.

With Tesla, I don't think it is anywhere near as likely as you seem to. Look at this:

http://www.teslamotors.com/blog/people-new-jersey

Going a step further, I have made it a principle within Tesla that we should never attempt to make servicing a profit center. It does not seem right to me that companies try to make a profit off customers when their product breaks. Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry and happened to me personally on several occasions when I drove gasoline cars.

Beyond that, with unbelievably fewer moving parts and over-the-air updates, Tesla vehicles require far less servicing. For starters, they don't require regular oil changes.

baddox19• 12 years ago

The danger in allowing manufacturers to determine how sales are made is they will likely dictate how repair and maintenance is handled.

That danger only applies to you if you don't read the contract agreement before signing it.

wmeredith3• 12 years ago

There are tons of service shops that don't sell cars. In fact, having worked in that industry for a while and as a gear for over a decade, I'd say if you want to get some of the worst car service around, head straight to your dealer. Otherwise, find a local independent mechanic.

Spooky233• 12 years ago

I think there is some truth there, but managing a national retail/service is not trivial.

Consider that among all of the computer OEMs, Apple is the only one who has successfully operated a retail channel. (Gateway did once, but it wasn't very profitable)

Also consider another franchise model: fast food. McDonald's has a vast network of franchise and corporate owned stores. There is no discernable difference in customer experience or cost between the two.

soperj2• 12 years ago

Dell? HP? Seriously.

njharman2• 12 years ago

That's cause apple is selling a lifestyle, like Starbucks. Others a fine with just selling you a computer and don't need glass box retail locations to do that.

larrys4• 12 years ago

"Frankly, Ford doesn't need its dealer network any more than Tesla does now, or they shouldn't. "

So you are suggesting that Ford is interested in replacing the franchised model and operating and owning the establishments themselves?

Car dealerships in many areas are basically small businesses.

They are a model that work in the same way that many bakeries have route drivers that are one step away from being employees in a sense (Fedex also uses this in some areas).

I don't buy the idea that it's a given that a large existing car manufacturer would rather just build out and operate car dealerships and that there is no value to an entrepreneur owning that dealership. Or that that even adds to significant extra costs for the consumer. By "significant" I mean the extra cost per car because there is a dealer. (Which by the way you do need a place to get service (even with electric) and you do need a showroom and a local point of contact).

How much profit per car do you think the dealer makes exactly that the consumer will save?

GFK_of_xmaspast5• 12 years ago

GM had a hell of a time killing Oldsmobile because of the dealers.

agumonkey• 12 years ago

I really wonder how you migrate obsolete networks like these. Secondary effects of its disruption, ex-employees etc... Did people theorize this in the past or was it left to nature, forces (lobbies etc) attempting to ensure survival until it was no longer possible and everybody accepted to let go.

tootie• 12 years ago

I think a lot of manufacturers will secretly support Tesla's effort. They can't risk alienating their dealers publicly, but the entire industry hates them.

gamblor9563• 12 years ago

Car dealers don't solve distribution problems from 100 years ago. They didn't have these sorts of distribution problems 100 years ago, and the first car dealers were simply manufacturer storefronts.

Car dealers solve the risk management function. Selling cars is a risky business. Car makers are in the business of making cars, which is significantly different business activity with a wholly different risk profile and operational needs.

Tesla can sell direct to customers because its small enough now that the localized retail/inventory risks aren't significant. This business model (of manufacturer-owned dealers) simply won't scale to a national level.

vajrabum• 12 years ago

Aren't you assuming that the manufacturer needs to store an inventory of cars somewhere? If the manufacturer sells direct and the lead time is short enough there's little to no risk because there's little to no inventory.

gaius• 12 years ago

Exactly. It's the same as wondering why you can't book a flight directly with Boeing.

dwd• 12 years ago

Because they're parasites

This could be said for most middlemen such as Real Estate Agents and Financial Planners.

Spooky233• 12 years ago

A better headline would be "Tesla must topple the car-dealer franchise system".

The retail side of the dealer network is really just a front door to the service department. Electric cars are supposed to have fewer service requirements, so if Tesla cannot defeat the franschise system, they are kind of screwed, as franchises will have to make more money on retail.

protomyth• 12 years ago

"Tesla must topple the car-dealer franchise system".

That is a much better description. For example, Ford probably doesn't care if Tesla succeeds or fails. They are stuck with independent dealers currently and any attempt on their part to change that will start a "starve out" of their sales as most dealers have multiple dealerships and sell multiple brands.

If Tesla doesn't break the franchise system, then Ford is no worse off than it is now and Tesla is blocked. If Tesla does win, then Ford can start selling direct itself.

gxs• 12 years ago

One of the great things that has come of this entire ordeal is simply education.

I usually take pride in doing my research well before buying something, but it had never really occurred to me that the dealers are forced middlemen. It had never occurred to me that it is ILLEGAL for Toyota to sell a car directly to me.

I am rooting for Tesla now with even more fervor. It's absolutely comical to me how politicians will tote the values of a capitalistic society, then turn around and get on their knees for special interest lobbies.

rayiner3• 12 years ago

How many employees do dealers have in Texas, versus Tesla? Now do you get why politicians get on their knees for special interests?

jfb2• 12 years ago

See also: how much money in local taxes do car dealerships pay vs. Tesla? They are very big players in local economies.

OWaz• 12 years ago

In Arizona where I live one of the biggest campaign contributors for any party is a family that owns dealerships across the state. According to this article [1] in 2010 this same family/company contributed more to political campaigns than did General Motors (see #6 on the list). Yes it's crazy that a corporation can donate - but that's another issue altogether.

I don't think a politician is concerned about jobs as much as they are concerned with campaign contributions.

I've seen first hand how campaign contributions work between the wealthy and politicians. It's unreal. In 2004 my uncle (founder of a big time HMO) contributed to the Bush campaign. In return he was granted exclusive time to the President to address whatever concerns he had. The White House would call him to guide the President on policy decisions. The White House will never call you or me for our opinion because we didn't pay for that privilege.

[1] http://threesonorans.com/2010/11/11/jim-click-gives-more-pol...

SilasX• 12 years ago

How many people in Texas enjoy the car buying process, versus hate it? Now do you get why that might not be a sufficient explanation?

Patrick_Devine2• 12 years ago

As has been said before countless times, we have the best congress that money can buy.

This is why rulings like Citizens United are turning this country into a kleptocracy.

humanrebar3• 12 years ago

The car dealership system predates Citizens United by decades. The only way to stop lobbying is to regulate how people communicate with their elected officials, and that cure sounds worst than the disease.

bcoates• 12 years ago

Car dealer protectionism has nothing to do with the US Congress.

Citizens United doesn't make it easier to bribe politicians, the entire point of PACs running ads is to lobby voters directly instead of the traditional method of bribing legislators.

baddox19• 12 years ago

We don't have the best congress that money can buy, because that phrase implies the existence of a competitive price-based market, which obviously doesn't exist.

If there was an automobile monopoly that defended its monopoly status with violence, and their only product was one crappy car, you probably wouldn't say "we have the best car that money can buy," because we all know that a competitive automobile market would produce better cars.

crazy1van2• 12 years ago

So I'm guessing that means you are for free speech unless that speech is about political issues and involves spending money you have legally acquired. In a free society, shouldn't political speech be the absolutely most free form of speech?

Please note, I'm using the dictionary definition of Freedom as reported by Google (https://www.google.com/search?q=freedom+definition) that says:

"the power or right to act, speak, or think as one wants without hindrance or restraint."

Not the other definition of freedom that says:

"the power or right to act, speak, or think as one wants without hindrance or restraint up to a maximum value of $2600 per candidate in a single election"

chongli• 12 years ago

It's absolutely comical to me how politicians will tote the values of a capitalistic society, then turn around and get on their knees for special interest lobbies.

This is only a contradiction if you view the government as some sort of impartial referee in the game of capitalism. If instead you rightly view them as the biggest player on the field that bullies everyone else and picks favourites then there is no contradiction.

emiljbs• 12 years ago

This is only a contradiction if you view the government as some sort of impartial referee in the game of capitalism. If instead you rightly view them as the biggest player on the field that bullies everyone else and picks favourites then there is no contradiction.

Or just as well see them as a parent that keeps the children from bullying each other.

baddox19• 12 years ago

The government isn't just a normal player on the field that happens to be bigger and stronger. Government also enjoys the acceptance by society that it is the only actor with certain authorities, like the authority to mediate conflict with violence, imprison and execute people, break up companies or prevent mergers by force, and fund itself via taxation. If a "normal" organization did any of those things, you would probably resist, and your neighbors would probably take your side.

mikeash5• 12 years ago

That's not an assumption, that's what these politicians say it should be. They say, explicitly and repeatedly, that government should get out of the way of the free market. Then many of them turn around and do stuff like this.

mncolinlee3• 12 years ago

Unfortunately, free markets aren't free if we let everyone burn down their neighbor's market stall. Without government, there is no free market.

Good luck building your startup if your larger competition can get away with Mafia-like tactics.

Depending upon whether people choose to actively participate in their government, it can either protect or harm us. I meet far too many laissez-faire "free market" know-it-alls who have a strong wish for the latter.

seventytwo• 12 years ago

Don't exchange one hyperbole for another. The government is in between being an impartial referee and being the capitalist bully.

Florin_Andrei6• 12 years ago

If instead you rightly view them as the biggest player on the field that bullies everyone else and picks favourites then there is no contradiction.

Yes, because that image is false.

The government is mostly the sock puppet of whoever has most money - biggest corporations and richest individuals, who essentially buy whatever politics suits them best.

Rest assured they derive great satisfaction from your misdirected anger against the "government".

Tloewald• 12 years ago

This is as simplistic a representation as the one you're contradicting. Government is necessary for capitalism to work, the question is how much it should do beyond the minimum (law enforcement, etc.).

Florin_Andrei6• 12 years ago

dealers are forced middlemen

"Forced", in that they force themselves upon you.

stcredzero3• 12 years ago

It's absolutely comical to me how politicians will tote the values of a capitalistic society, then turn around and get on their knees for special interest lobbies.

There is a weird paradox, in that lobbyists are often the best source of quality information for legislators. They have the time and money to produce well packaged and well researched information. That it has a bias for the lobbyists clients follows from that, however.

Another paradox: Our system has us electing the most efficient marketers for a job that should center around strategic thinking and collating complex information.

SixSigma• 12 years ago

Did your research extend as far as to why it is illegal ?

When it was introduced it was only the manufacturers that were able to sell cars to you, by their own choice. The law was introduced to break the stranglehold that manufacturers had on retail operations. Car dealers were able, for the first time, to guide buyers through the positive and negative aspects of the features of one model against another in a climate where they weren't just bashing the competition to make a sale.

It is ironic you choose Toyota as your example because when breaking into the US market they faced similar problems as Tesla does now. At the time, in Japan, the car dealers sold cars door to door, there were no showrooms. And you dealt with the same dealer for all your life. Japanese joked that it was easier to lose contact with your parents than it was your car dealer.

Boy, does the US now hate Toyota http://www.bbc.co.uk/news/business-26650173 That's some spin Holder puts on the story.I guess he's got to try and get GM's bailout money back somehow, just another $23.9bn to go

Shivetya2• 12 years ago

Politicians regularly use their position to make society bend to their will, this occurs regardless of the professed economic model or freedoms.

Politicians are the one percents. The rich just have a better means to make them look away.

api• 12 years ago

I'm with Tesla here, but this headline is weirdly almost Orwellian. Car dealers are not a monopoly. They all have different owners! But they are a state-mandated middleman, something I do not support.

The reason I'm with Tesla is because I know why they're doing this. The automotive industry is for the most part terrified of EVs as they have far fewer moving parts, no oil changes, etc. They also have the potential to last longer and (eventually!) be easier to produce. Tesla is doing this because if given half a chance car dealers will sideline if not outright sabotage any EV that attempts to succeed in the market. They're going around the car industry because the car industry wants them to fail.

venomsnake• 12 years ago

Oligopoly is monopoly in all but name.

BrandonMarc4• 12 years ago

I've often been amazed the car-dealer industry has lasted this long. It's all too often based on deception, disrespect, intimidation, and rip-offs - from the showroom (overcharge as much as possible), to the trade-in aspect (under-charge using the same tricks ... go figure) to the financing (bury the overcharging in extra years of interest paid), to the garage (a skilled mechanic will often still charge far less than the dealership for the same service).

No, not every dealer works this way. Just the majority. If Tesla can make a change to this phenomenon, then good riddance to bad rubbish.

As an aside, this (long) story from Edmunds gives outstanding insights to how dealerships work, and what options are available to consumers.

http://www.edmunds.com/car-buying/confessions-of-a-car-sales...

It's fascinating to see how racial profiling comes into the mix. An ethnic group - according to dealers - will be known to have bad credit, or to pay the overcharged price no matter what without a fight, or (as dealers claim of white people) chiefly car-shop online and come armed with information looking for the best price.

chris_mahan• 12 years ago

Agreed. Also very often within the dealership itself: Salesman lies to you, finance guy lies to you, other salespeople completely ignore you. The only person relatively nice is the receptionist.

mikeash5• 12 years ago

It's interesting to think about how much of this crap is ultimately enabled by the ubiquity of car loans.

Transforming the sticker price into a much lower (in terms of which number is absolutely bigger) monthly charge completely changes the psychology of it.

How many people don't do as much research as they should because they're thinking in terms of $500/month instead of $25,000? How much BS can the salesman then get away with because of that?

How often does a salesman successfully pitch some completely useless extra as being "only $20/month" when the buyer would never pay $1,000 for it if they actually sat down and thought about it?

How often do buyers end up spending way more than they intended to because they don't properly factor in interest, or the added cost of extras, or down payments, or the costs of taking out the loan itself?

I bought a car in cash last year and it made the whole process pretty nice. A whole fat layer of nonsense was just stripped away.

I realize this isn't practical for everybody, but how much of it is that it's outright impossible for people, and how much of it is that Americans are conditioned to buy cars on credit, end up spending more than they should and buying more car than they should, making it harder to save up money, making the whole cycle repeat.

In many ways, it's just another example of how it's expensive to be poor, and cheaper to be better off.

wil4216• 12 years ago

Ford tried to uproot the dealers years ago and it didnt work. I did a case study in school on this topic, I cant seem to find my source again...

Unions need to go...they hurt innovation and sometimes completely destroy it.

GFK_of_xmaspast5• 12 years ago

How on earth is this a union issue? It's capital vs capital.

wil4216• 12 years ago

Really you think the dealer unions didnt lobby to get tesla banned from selling in that state?

From:

http://www.nj.com/politics/index.ssf/2014/03/chris_christie_...

"The state Motor Vehicle Commission last week unanimously passed a rule requiring franchised dealers to sell electric cars rather than allowing manufacturers to sell directly to customers as Tesla does at two showroom locations in New Jersey — at the Garden State Plaza and The Mall at Short Hills."

requiring franchised dealers

And who is going to be franchising? The Unions will be. Maybe not in NJ but I gurantee other state's dealer unions are feeling the pressure that may come from tesla.

vondur• 12 years ago

What do unions have to do with Tesla and this issue in New Jersey?

wil4216• 12 years ago

Maybe not in NJ but I guarantee dealer unions are lobbying as we speak to get Tesla banned from various states.

Bpal• 12 years ago

That's fascinating how people fear to take something new and better as opposed to old and traditional. The same has been with adoption computer. Yes, it has changed our lives and the world. But if this move hadn't been done, would we get better life? I don't think so. Getting info from Anywhere in the world in the split of the second is as good as breathing Clean air in big cities.

vvvv• 12 years ago

Actually, Tesla is not the first auto company that is attempting to dispense of dealers. When Daewoo entered the UK in 1995, "their market research revealed that car buyers disliked dealers on commission, hard-sell, aggressive sales techniques, over exaggerated promotional campaigns and poor after-sales service" so "Daewoo set up its own dealerships with staff paid a salary rather than commission – trained, helpful sales advisors providing information rather than pressing for sales. Showrooms had crèches and children’s play areas and offered coffee. Cars were not serviced at the same location, but rather by the well-known retailer Halfords in their out-of-town service centres. The themes used by Daewoo to further differentiate itself included good value, reliable cars (3 year warranties, AA breakdown cover) with additional safety features (eg ABS brakes and side impact protection) and additional features and benefits that would otherwise be extra cost (eg power steering, no-fuss guarantees, courtesy cars or pick up and collection for services). The result was that in the first six months Daewoo sold a remarkable 14,000 cars in the UK."

http://www.palgrave.com/business/ebm/lecturers/session4/4-da...

http://books.google.co.uk/books?id=33HpNgHUkb0C&pg=PA144&lpg...

Theodores• 12 years ago

You have a good memory!

If I remember...

The original Daewoo cars in the UK were based on old Astra (and other Vauxhall) models, with body panels that were just not quite as well defined as the Astra originals. This appearance was a bit like the tacky Rover versions of Honda cars or how we imagine Chinese 'knock offs' to look. They were competing against Lada and other low price motors at the budget end of the price range. I don't think the service-by-Halfords arrangement worked out too well for them and other dealerships tried their hardest to do them down. Nonetheless they were a disruptive presence in the marketplace - at the time I lived in a rural part of Wales and those Daewoo efforts were quite common.

In a UK context the Tesla dealerships are probably more akin to the McLaren dealerships (I think these are owned by M(a)cLaren, i.e. Ron Dennis et al., but they could be a franchise). McLaren are an up-market premium brand and, having a McLaren dealership in nearby Knightsbridge, probably isn't going to stress out the Ford dealers on the A5 (or rural Wales) in the same way that Daewoo disrupted things. I think our American friends are over-worrying about the 'threat' Tesla are to regular car dealers.

brc• 12 years ago

Ron Dennis is only a minority owner in McLaren.

The dealership is fully owned by the company as far as I know.

nerfhammer• 12 years ago

Saturn was similar in some ways

http://en.wikipedia.org/wiki/Saturn_Corporation

mikestew2• 12 years ago

With all the talk about money-driven politics, and how politicians listen to the car dealers over what you have to say, at the end of the day I'm the one that fills out the ballot. And I would defy anyone to point out an industry endpoint (at least in the U. S.) that has as much a reputation for dishonesty and obfuscated pricing as auto dealers. Lawyers at least come in handy from time to time, but I'd guess car salesmen will have a hard time finding a sympathetic ear. People expect car salesmen to just lie to their face. Seat protection spray and undercoating being a rip-off is so cliched it's the subject of comedy routines (and everybody gets the joke). Yet dealers still sell it, and we sit there saying "no...no...no...ask me again, and I'll buy the car elsewhere" because that's just the way it is, right?

Maybe it doesn't have to be that way. If you live in NJ, TX, or another state that doesn't want to let Tesla sell cars, let a state politician know. Maybe you think your U. S. Congressperson won't listen to you, but at the state level they are much more likely to lend an ear.

mikeash5• 12 years ago

If just you filled out the ballot, I imagine this would be much less problematic.

The problem is that you, and people like you, are not normal. Most ballots are filled out by slack-jawed yokels who choose their car because they liked the ad they saw for it on TV, and who choose their politicians in much the same manner.

loceng• 12 years ago

Tesla not only can but they will, and they are in the lead to do this, and will own the majority of this market. If I wasn't investing in myself I would be investing in Tesla.

jrjr• 12 years ago

why not sell them through Indian Reservations ? then the 'laws' and special interests could GFY.

it would be great for everyone involved.

sixQuarks3• 12 years ago

This may seem counter-intuitive, but an educated car shopper today can actually get a better deal because of this archaic franchise system.

The truth is, dealers do compete against each other ferociously. Yes, they will rip you off if you come unprepared, but if you shop your deal around to enough dealers, chances are you will get a zero-profit or even below-cost deal on your new car.

When the dealer franchise system has been gotten rid of (I give it another 15 to 20 years), supply and demand will be better matched and manufacturers will be optimizing their profits.

fancyketchup3• 12 years ago

See, but this just shows that even those who think they are educated car shoppers actually aren't. Dealers never sell cars at zero or negative profit, unless you ignore things like holdback (a rebate on the wholesale price of the car when the car is sold at retail) or factory quota incentives (a "bonus" for dealers who sell a certain number of certain models of cars in a particular month). If you think you got the car for below cost, chances are you forgot to factor in holdback or you just pushed the dealer over the edge for a big fat manufacturer bonus check.

sixQuarks3• 12 years ago

A lot of irony in your statement. I've been involved in the retail automotive space for 8 years, so I'm not just talking out my ass.

It's a FACT that some dealers will sell new vehicles for below cost. One very simple example is when dealers are trying to hit stair-step incentive goals near the end of the month. This is where a manufacturer will pay out a bonus incentive on EVERY vehicle sold that month, if and only if the dealer hits a certain sales goal. If they are off by 1, they don't get any bonus. If they sell that one additional vehicle, they may get as much as $100,000 in bonuses. Dealers sell cars for below cost all the time.

mikeash5• 12 years ago

You can get a better deal because of it, but how often do you? Most people do not.

In other words, the current system offers benefits to the best negotiators, and screws everyone else. I'd rather even that out, especially since there will be plenty of competition between car makers anyway.

I don't know that people really get zero-profit or below-cost deals. I'm sure they think they do, but when people say that they're typically (not always, and not saying you're doing this) looking only at the car's invoice price, and ignoring holdbacks.

(For those unaware, manufacturers typically pay out a sum of money to the dealer when the dealer sells the car. This effectively reduces the invoice price of the car but, crucially, doesn't reduce the actual number on the invoice. Thus, you could buy a car "at cost" and the dealer still makes a profit because they get extra money afterwards.)

randomdata• 12 years ago

Without access to the dealer's financials, how do you know what their profit/loss even is? There are many variables like land/rent costs, local wages, etc. that could have a dramatic effect on profitability between seemingly similar dealers.

Also, having recently purchased a new car, I noticed that every dealer specced them slightly different, so you couldn't easily compare the vehicles one to one. Something as simple as the color of paint changed the price by hundreds of dollars. Not an insurmountable detail if you are careful, but you really have to do your homework.

Not to mention that it becomes a massive time sink. Given a typical programmer's hourly pay, in many cases it would be more economical to pay out more money and get back to work than spend that time looking for the savings.

So, I do agree that shopping around can net you a better deal, but for all the effort required, I question if it is worth it. I'm going to very sad if I can't buy my next car online (and I hope it will drive itself to my door).

casca• 12 years ago

For more info on the how and why of US car dealerships, here's a good Planet Money podcast: http://www.npr.org/blogs/money/2014/03/14/290241292/episode-...

Florin_Andrei6• 12 years ago

That episode was fantastic.

radley• 12 years ago

Monopoly? http://www.youtube.com/watch?v=G2y8Sx4B2Sk

RankingMember2• 12 years ago

Anything that can bring down dealerships has got my backing. I don't understand why the auto manufacturers wouldn't want to lobby to distribute their own vehicles rather than have the frequently dickish/predatory/incompetent sales/service of dealerships be the local face of their company.

hnriot• 12 years ago

Like Saturn did...

RankingMember2• 12 years ago

Saturn didn't. Those were still dealers, just more closely-watched ones since GM was really trying to turn over a new leaf.

crabasa• 12 years ago

"the initial benefits of the dealer franchise system have long since given way to rent-seeking, inefficiency and unintended consequences"

This is by far the most interesting part of what is a rather short and fluffy piece with a strangely assertive headline.

How exactly does a government/regulator quantify when the benefits of a granted monopoly (i.e. power, telecom, etc) has outlives its well understood purpose?

wil4216• 12 years ago

They will probably not topple the monopoly as long as we allow lobbying in this Country. Who's agenda do you think the legislators of these bans are following?

The people who elect them or the lobbyist who fund them?

sebnukem2• 12 years ago

I truly believe that lobbyism is legalized corruption.

wcfields• 12 years ago

Sigh... Guess I won't ever see Gene Simmons Tesla President's day KISS-A-THON sales event.

puppetmaster3• 12 years ago

Unless Tesla starts 'donating' to politicians, it won't go anywhere.

tdiggity• 12 years ago

Why can't it be as simple as this:

If you sell direct, you can't have dealers. If you have dealers, you can't sell direct.

Are dealers afraid that manufacturers like Toyota or Ford would just go up and undercut them? I doubt it, that would piss off a lot of their customers (the dealers). The dealer decided to open a particular branded dealership, so if you're in a Toyota dealership they shouldn't give a crap about what anyone else is doing.

tn13• 12 years ago

Can someone care to explain me why the car dealers exist in first place ? Isnt it much more economical for Ford, Toyota etc. to simply start selling cars from their own retail store chains ?

It is likely to make cars more cheaper and car companies more profitable. How can any legislation banning it get passed in USA ?

krisgenre• 12 years ago

Can't Tesla create their own 'Car Dealership' company and sell through it?

Tesla Can Topple the Car-Dealer Monopoly

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