Dealerships Adapting/Changing

EVTrucking said:

With migration to online ordering it seems to me that dealers must adapt and change.

• Sell at MSRP, volume sales
• Provide much better support: and information during production and shipment.
• Carry less new car inventory
• Stop pushing the sale of inventory to the exclusion of online ordering.

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While I agree with your four bullets as general outcomes, your list doesn't address the element of why those 4 things are issues to begin with.

The independent dealership model is the problem. Penske, Hendrick, and Ashbury make billions of dollars revenue and are all cash flow positive acting as the middlemen of the entire network. If you're GM and Ford, you'd love to capture all that portion of the distribution network and resulting cash flow. And that's why the state governments won't allow the manufacturers to get rid of the dealer model. You won't see positive progress to your 4 bullet points without removing the state by state franchise dealer laws that protect the old business model.

MSRP would simply be "the price" if the manufacturers were actually setting prices. But all the independent contracts that GM has with its dealer network prohibit GM from setting prices. And since GM isn't the one actually selling, each independent network gets to establish its business planning (sales, support, and service etc). Floorplanning dealer stock is crucial for the health of a supply chain where the seller and manufacturer are different entities. But if you want to see improvements as an end customer, you'd have to break the whole thing and allow business to consumer sales.

tsuintx said:

Mandated franchised dealership model is outdated. Most consumers are savvy enough to be able to order their vehicles online by now. No glass palaces needed. The only thing dealers are needed for are used car sales and aftermarket support (parts, service, body shop etc.)

One can only wish, though, since the industry has huge lobbyist organization as well as hands is the pockets of numerous lawmakers in all the states where such franchise law requirements exist.

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Yeah, the issue is that the jobs at the dealerships are present day. Every advocate for the inefficient dealer model simply points to all the jobs that would be lost if GM could do BTC sales. Plus they assert the service would get worse.

All the sales, service, finance, back-office, operations, reception, etc exist to provide the "best possible service". The sales-network advocates claim that GM's corporate stiffs cannot provide great consumer facing outcomes since the corporates are just a bunch of old heads sitting atop the RenCen.

While some customers are getting completely wrecked by the dealers in this time of limited inventory (did you see that $90k Z06 markup that someone go hit with?), those advocating the existing dealer network simply point to the millions of "satisfied" customers who greatly appreciate having a local independent shop to visit. Each automaker will need to do better to identify a systemic and large-scale failing of the existing system to reform it. And so far they haven't been able to produce much more than incidents of "poor form" on pricing and a somewhat cumbersome ordering process.

But I agree, while the existing automakers are stuck playing a game with an arm tied behind their backs, Tesla is just moving swiftly and giving customers who hate the dealer model a (for the most part) great experience. Tesla also has issues, but nothing systemic or large-scale failing in the states that they do business.

DiscoLives4ever said:

One thing that has surprised me is that no dealership group (presumably one with many brands) has stepped up to say, "We know consumers want to easily order online, so we are going to do it" and just start selling direct themselves at MSRP. There are several out there who already push at/below MSRP and willingness to ship anywhere (Buster Miles Chevrolet is one), and if they were to just put together a tool online they could absolutely start moving a ton of volume.

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There's just too much money in play for the sales team to capture if they negotiate every deal. There are very few industries that profit off of dishing pain to their customers (I can go into nauseating amounts of detail about how pinch points are cleverly inserted in the sales process to provide maximum value extraction).

What other industry forces unwilling buyers to suffer a full day negotiation session where the seller has all the data? (all those lame sites that purport to give "true car pricing" are just lead-gen tools to feed customers to dealerships). What other industry gives the seller the ability to put 100+ years of learning on squeezing customers for money in a well scripted and calculated purchase flow? So why would an established player with this much power give up their mega-advantage to "make it up with volume?"

I know some dealerships in North America put the negotiation room on the south side of a building and break the HVAC/fan in there to make a literal sweatbox to gain an advantage in a negotiation. There's a reason customers hate the experience, but the industry wants it to persist. Dealer markup and kicking customers repeatedly is their "right as free market participants".

The US Auto industry (except for Tesla and Rivian) are making a killing on each transaction solely because those with power control the entire purchasing experience. They dish out pain in a controlled fashion, because people will literally spend money to avoid further pain. The more someone wants a car, the more pain the dealership will dish out in the sale. No wonder customers hate the traditional car buying experience. Tesla doesn't have to give up a sales-margin, so their DTC model still makes a ton of money for the automaker.