Ford CEO says EVs will be sold 100% online with nonnegotiable price
usatoday.com
usatoday.com
Here’s the quote with more context: “I believe for retail, we have to -- it's kind of like what happened between Amazon and Target. Target could have gone away, but they didn't. They bolted on an e-commerce platform and then they used their physical store to add groceries and return -- make returns really much easier than Amazon. They used their expertise as a physical retailer to their advantage, but they modernized the e-commerce piece. So it would be really easy to do business with them. It's exactly what we have to do on the retail side. We got to go to non-negotiated price. We've got to go to a 100% online, the vehicle there is no inventory goes directly to the customer, 100% remote pickup and delivery, but then we have this opportunity to use our physical presence, they outperform them. Like, I believe some Mach-E and Lightning customers would love to have a Mustang for the weekend. Maybe they want a Super Duty. I can do that, they can't do that, unless they ran a Ford.”
Source: https://seekingalpha.com/article/4515793-ford-motor-company-...
> "It's going to be much more efficient, a lot more online. It's going to be a really different model."[1]
Obviously this will be very controversial and subject to interference by state legislators who have often protected dealerships. Will be interesting to see this transition.
https://insideevs.com/news/571959/ford-dealerships-impacted-...
Why? They want to protect that recurring service bay revenue. Oil changes, plugs, belts, etc.
In the past decade we've had one new ICE car and two new EV cars.
The ICE car has been in the dealer once for a couple hours to replace rear hatch support struts (nothing to do with the engine, so could happen to any EV that has a hatch).
The EV cars have spent many weeks in the dealer for repairs and waiting for parts. Also issues unrelated to the engine, this was for door lock problems and window regulator problems.
In theory the EV motor is simpler than the ICE engine. But in practice, the ICE engines are bulletproof and almost never have problems. In 36 years of owning cars, I've never had a car in a shop (or dealer) for engine issues. It's always electrical system, electronics, seats, windows, shocks, etc. Components that both ICE and EV cars share.
My spouse and I recently purchased an extremely difficult to find plug-in hybrid EV. We had placed a hold on a specific vehicle destined for delivery to the dealership a few months later. We paid a deposit and signed a receipt that made reference to that vehicle and was given the final price sheet for that specific vehicle at deposit time.
Two days before we were scheduled to pick it up (more than two months after we put the deposit down) the sales guy called and said that the dealership had instituted a new policy on the first of the month that no sales of that specific model and trim level would be authorized by the deal desk without an interior and exterior water resistant coating, and that the lowest price he could offer was an additional $2,500.
As you can imagine that did not stand up to scrutiny and we walked out of there with the vehicle at the total price recorded in the initial paperwork. They signed on the dotted line and never said a word about any new policies until we were ready to pick it up. They did this in a U.S. state where that practice is not legal.
You bet we told Toyota about that when they sent the survey.
If they weren’t making enough to meet their needs then they should have known that when they were negotiating.
All of the other components still need maintenance. Tires, alignment, suspension etc.
Telsa insisted on it's direct sales model and it was more politically expedient for regulators in many states to carve out an exception to the dealership requirement only for car companies that sell EV's exclusively (only tesla at the time).
While I suppose this didn't seem like a huge threat to the car dealership lobby in each state at the time it's clearly come back to bite them and is the main reason Fords Electric vehicle production and distribution is a different 'car company' on paper, so that they can take advantage of legislation designed for tesla.
Back in the 1930s, the car companies established this system so that they could worry about making cars, and the franchises could worry about selling and repairing them.
Early on, though, the franchisees lobbied their state governments for protection. They feared, among other things, that the giant car companies could open up their own stores across the street, cut prices, and crush the franchise like a bug.
To prevent that kind of abuse, all 50 states passed “dealer franchise laws.” They protected the dealerships in various ways—including barring any car maker from selling directly to consumers.
Those laws didn’t foresee the modern era. What they meant, of course, is that “no car company that has franchises can sell directly to consumers.”
They weren’t even thinking about companies that don’t have franchises, because there weren’t any at the time.
Over the years, Tesla’s legal team has gone from one state legislature to another, pointing out how that rule has become outdated, and suggesting that it get changed. In some cases, they succeeded.
In others, though, Tesla is running into a tougher obstacle.
State legislatures and courts have been smacking down this kind of shenanigan for nearly a century now.
Personally, I think theres ~50% chance Ford will have to split into two companies (separate stock ticker etc.) to be allowed to have an EV only, no-dealership, sales model,
Ford announced 3 months ago that they were forming a new corporation, Ford Blue, whose purpose is to skirt state dealership laws in order to lawfully sell these EVs direct to consumers. So this is definitely not just a comment.
https://www.freep.com/story/money/cars/ford/2022/03/02/ford-...
Notably, Ford has explicitly said they’re not doing that: “We’re not keeping dealers in the mix 'for the moment.' We are betting on dealers for the long term. I want to make that really clear. I’m not mincing words. We will have new standards and a new experience. But we learned a lot by watching Tesla."
Maybe going direct is the secret plan, but I don’t see how they get there.
Yeah, the dealership and the state level dealership associations aren't going to go out of business without some good fight. Even though I personally don't like the markup to be paid at the dealerships, but they exist for some good reasons: educate the consumers, financing, DMV paperwork and most importantly service your vehicles. EVs need much less service visits but when they do - it's likely harder for DIYers to tinkle with High Voltage battery systems and/or the infotainment firmware diagnostics and updates.
Every dealership I've been to has been more interested in feeding me whatever line of crap they think will get me to buy a car, not actually educating me about the different products available.
>> financing, DMV paperwork
Tesla and Carvana have proven these can be taken care of without a third party dealership. In most cases, financing is provided by a bank or credit union, not the dealership itself
>> and most importantly service your vehicles
Unless the fix is covered by warranty, I'm not taking my car anywhere near a dealership. They charge considerably more money than my trusted mechanic. My Hyundai dealership wanted $125 just for an oil change on a 2013 Sonata.
In theory, a dealership could be good for all of these things. In practice though, they suck. There is a reason most people hate car dealerships.
I bought a new car direct and I was educated, my credit union was better than the manufacturer's financing offer, the manufacturer did DMV paperwork, and the manufacturer does service.
9 years ago.
What am I missing?
I have yet to find to a situation where the overall direction of education flow was from the dealership salesperson to me.
That effect was significantly magnified when I was shopping for, and ultimately purchased, an EV. The only thing I can recall the salesperson knew more about that car than I did was where the dealership kept the keys.
A car handle on a Tesla that needs replacing is $1,000.
The last two cars I bought the salesperson knew nothing about the cars. People can learn much more about cars by going to a web site than talking to a sales person.
- DMV Paperwork
Dealerships charge consumers for the privilege of submitting DMV paperwork. This could all be handled online. Don’t understand the benefit.
- service your vehicle
I go to independent mechanics. They service my vehicle just fine.
Dealerships have got to go. They’re a huge waste of time space and money. They reflect crony capitalism at its worst.
The OEMs want to us EVs to finally dump the dealerships.
https://twitter.com/pluginalberta/status/1531406942119137281
> "We only profit in one way: from new car sales and new car sales alone," Maron said. "We can't ... profit from services because our cars have far less parts than gas-powered cars. There's no regular service visits for engine tune-ups and oil changes. ... We don't make money off financing programs. We don't have insurance products or add-ons. A franchise dealer would look at this and scratch their heads. They would not know how to make money on this model."
> Maron says Tesla is fully committed to its mission of replacing all gas-powered cars with electric vehicles -- a mission auto dealers may not be eager to embrace.
> "We don't simply believe that electric vehicles represent a nice complement to gas-powered cars," Maron said. "We believe it's imperative they are replaced entirely by electric vehicles. ... It would be impossible for traditional dealers to convey this message adequately. This isn't a knock on them, but dealers are not fundamentally committed to the mission of EVs — we are. They make 99% of their revenue off of gas-powered cars. If you're opening a Yankees team store, are you going to ask a lifelong Red Sox fan to manage it?"
https://www.buzzfeednews.com/article/johanabhuiyan/tesla-sla... (2016: 7 Reasons Why Tesla Doesn't Want To Sell Through Dealerships)
Their role is to collect orders, provide test rides and service the cars.
I don't know if that's right (anybody with more info care to comment?), but it's at least enough to give me pause on the "dealers will hate nonnegotiable pricing" claim.
I wouldn't cry for nor count the dealers out just yet.
Previously I could never sweet talk dealers into the kind of deals some of my mates could.
The Tesla model is such an improvement.
If banking and Everything else is a good example, people are getting used to buy online.
I bought even my current car without seeing it before.
I bought my bike online as well.
If more and more do that dealerships might loose too much revenue anyway to keep them afloat.
I know this is off-topic, but the easiest return I ever made was an amazon return. I went through the return process on amazon's website and was given a QR code which took a few mins. I drove to the nearest Kohls, walked to the amazon kiosk, showed the QR code to the employee, and handed over the return. Took all of 30 seconds in store.
Anyway, back on topic. A hybrid model makes sense for Ford to compete, and it is a lot like Best Buy/Target in many respects. However dealers have made a living for a long time being the middle-men, I wonder how they will deal with additional competition. Best buy has a problem where people look at the product at the store then end up buying online, I could see people taking test drives and then ordering from the Ford website. Although I think the dealer will arrange commission if that happens.
Well sure. That’s because they have enough money to just toss whatever you returned in a landfill.
You got your money back, and we all pay in environmental damage.
Nowhere in that does he say outright where dealers fit into an online, fixed price world. He only makes super vague statements like "dealers will be more specialized."
Reads to me like Jim isn't planning on dealers being around in the future but he's being vague enough to try not pissing the dealers off in the near-term.
They could have leveraged their large stores to be showrooms / distribution hubs (that they mostly already owned, which is why the private equity people were so interested in them, due to their real estate holdings). You visit a sears, you see what you want, you order it and in a couple of days you come back to pick it up. Their logistics pricing should be cheaper than what amazon could have done (as they are skipping last mile), and for many consumers it wouldn't have made much of a difference (the sears that was local to me growing up was in the same general shopping center as the groccery store we generally went to, so we were regularly there).
Of course they did try to do "in store pickup", but this was when they were dying already and the experience was pretty terrible (i still used it a bunch back in the day as at one point they were basically paying us to shop at sears via the amount of free shop your way points they were giving out).
Why would anyone want that? If I’m going to go so much as 15 minutes out of my way, I expect to leave with the item in my hand that day. That’s the killer advantage for brick and mortar retail.
I don’t even want to go to the store the first time, but I sure as hell don’t want to go twice if Amazon offers the same overall latency with zero trips to the store.
I feel like the wilder "DNA fight" that wasn't was "80's Sears/Amazon wannabe": Service Merchandise. They tried to recreate the Sears formula for the late 1980s/early 1990s and basically convergently evolved the Ikea model before Ikea grew any US presence as just big warehouses with smaller showrooms up front. They made a bunch of silly mistakes in the 90s trying to grow beyond their roots in primarily the US South region to more national regard/footprint, but if they hadn't made those mistakes they probably could have been a real interesting contender against Amazon.
How does it ‘read too much into it’? He literally says they need to go to a 100% online order, no inventory, no negotiation sales model. That’s a HUGE a change from today.
John Deere (the company I work for) works this way: everything is just in time, if you want a new tractor you order it and get it 3-12 months later. You still have to order from a dealer. Dealers do not keep new tractors on the lot, except for demo units and service loaners.
I'm not sure how this will work for Ford though. Deere is selling to businesses, a new tractor is a financial decision talked over with the accountant, and are bought/traded in based on tax deductions (the date you place the order counts for ta purposes not the day you take delivery). Cars seem like more of an impulse purchase and so people want to go to the dealer and drive a new car off the lot. Dealers (and Ford) doesn't want to risk someone buying a car and then changing their mind, which is a lot more likely to happen if you don't have the car yet. Even for Deere, dealers normally keep new small tractors on the lot.
For used car purchases that’s a different story I guess. Maybe dealerships only exist to service cars and sell used ones.
Shrug.
Once I saw that I got a bit sad.
It is their policy in the contiguous US to price match target.com to Target Store and Target Store to target.com. The policy doesn’t cover Target Store to other Target Store.
That being said, is there any counterpoint to this view? Are there any benefits that dealerships offer today over direct sales? What would we lose if we got rid of every dealership? If there is truly little or no advantage, why has this obvious disruption never come up in the last ~100+ years of car sales in this country and all over the world?
the only thing I can think to say is that they are still a convenient repair facility, Tesla is fairly notorious for slow turn-around for repair.[0]
I think a nice middle-ground would be the conversion of dealerships into showrooms/receiving-centers/repair facilities -- oust the sales portion and highly regulate the repair pricing. Faster repair times while getting rid of most of the scummy parts of the car dealership experience.
[0]: https://www.teslaownersonline.com/threads/model-3-significan...
If Ford is deliberately bypassing their dealerships for sales, then I would expect the repair service provided by dealerships to be even worse than normal, since they have no motivation to make you a repeat customer. And if not the dealership, where will I have the truck serviced?
If you drive a Ford, sure, it needs a lot of service. Which is why I stopped buying Ford. Toyota and Honda don’t need much service, and I don’t see how they are money makers for the dealer. And when you move to EV, you need even less service than before since the is no ICE to maintain.
It’s entirely dependent on the market and region. Sometimes it is cheaper to go to the dealer depending on make and model. It also depends on where you live and the availability of mechanics and parts.
Sometimes they’re even worth using for “normal” repairs because they will sometimes bill by the book even if the actual labor time is higher.
I waited six months for a brake booster replacement in my Audi SQ5 as it sat in the service center. They did give me a loaner the whole time though...
Try that with Tesla. Hey, we can give you Uber credits. Hope they're usable in your area, and you didn't have too much to do.
The "dealership" model needs to be killed off. It's probably just a few dozen moguls that make money off of these dealerships and spend most of their money lobbying.
I don’t love the dealer experience, but they distribute the wealth of the auto industry regionally instead of concentrating it in Dearborn or wherever. Local dealers are always sponsoring little league teams and paying property taxes on relatively valuable real estate in a way that Tesla never will.
I dunno, it’s hard to argue this if you take it as gospel that the economy is at its best when it’s finding efficiency at whatever cost. I don’t feel super strongly, but I do think there’s something to this.
https://old.reddit.com/r/carmax/comments/cx82v8/carmax_refus...
Kind of reminds me of stories of folks who need support with Google account issues - sometimes things like that just slip through the cracks. Google might have processes for typical cases, but if a weird corner case arises, it can be impossible to get someone to make an exception to help you.
I wonder if things would go the same way with centralized sales and repair processes ... "hey my new car is having this weird issue" ... "sorry the algorithm says everything is within spec, go away", rather than potentially being able to contact multiple independent dealership service departments until someone is able to reproduce/fix your issue.
if your driving a newer car, theyll handle warrenty work, recalls, service packages that your car came with.
Everyone is having parts Problems, it's the scaling that Tesla still needs to do.
"Because they're scaling up". They've been making vehicles for 14 years, how much more time do they get to realize they should have a parts network?
I'm guessing this is less true today than in years past.
edit: I can see from the two other comments here alongside mine that this is a common observation.
Tesla has made fixed-price online sales work so far, but notice that they're scrambling to build the support network. They're re-creating most of the dealership model but bringing the ownership in-house. That's only good if their customer service is good, because now you don't really have any good alternatives.
> why has this obvious disruption never come up in the last ~100+ years of car sales in this country and all over the world?
This is important. We can try to point to laws, but the more likely answer is that the current model is the best we've invented yet. There have been attempts to change, and more often than not it's the consumers that reject it, not lawmakers.
Nevertheless, new vehicle sales including F&I is a non-negligible factor in most dealerships' bottom line, and new vehicle sales can also be a significant driver of service volume (both organically and as a result of loyalty incentives).
You're also correct in assuming COVID has been good for new vehicle sales profitability.
Here are the per-segment breakdowns reported by the three largest dealership groups in the US, before and after COVID:
1. AutoNation (AN)
2019 Rv: 52.3% New, 25.6% Used, 16.7% S&P, 4.8% F&I, 0.6% Other
2019 GP: 14.3% New, 10.4% Used, 46.1% S&P, 29.0% F&I
2021 Rv: 46.7% New, 33.4% Used, 14.3% S&P, 5.4% F&I, 0.2% Other
2021 GP: 24.3% New, 13.9% Used, 33.8% S&P, 28.0% F&I
2. Penske Automotive (PAG) (excluding non-retail auto dealership businesses)
2019 Rv: 45% New, 35% Used, 6% Fleet, 11% S&P, 3% F&I
2019 GP: 23% New, 12% Used, 1% Fleet, 43% S&P, 21% F&I
2021 Rv: 44% New, 38% Used, 5% Fleet, 10% S&P, 3% F&I
2021 GP: 27% New, 17% Used, 2% Fleet, 34% S&P, 20% F&I
3. Sonic Automotive (SAH)
2019 Rv: 47.0% New, 35.0% Used, 13.0% S&P, 5.0% F&I and Other
2019 GP: 15.0% New, 10.0% Used, 44.0% S&P, 31.0% F&I and Other
2021 Rv: 41.3% New, 39.3% Used, 11.3% S&P, 8.1% F&I and Other
2021 GP: 24.1% New, 6.9% Used, 35.2% S&P, 33.8% F&I and Other
(Rv = revenue as percentage of total, GP = gross profit as percentage of total, New, Used, Fleet = vehicle sales, S&P = Service and Parts, F&I = Finance and Insurance)
(source: SEC filings)
N.B.: Gross profit may be a misleading figure in this comparison, as it excludes major expenses (notably, salaries and commissions for non-administrative staff) directly attributable to particular business segments. Alas, I'm lazy, and these are the only per-segment percentages immediately available in all dealership 10-Ks.
With all that said, I imagine many, possibly most, dealerships would remain comfortably profitable even if net (non-F&I!) profit on new vehicle sales were zero.
Finally, note that fixed vehicle pricing is not exactly a new idea: GM famously introduced the Saturn marque with a similar tactic. And as with this older example, I assume Ford isn't planning to mandate fixed pricing on financing, insurance, trade-in allowances, third-party extended warranties, dealership-installed options, or anything else beyond the selling price of the vehicle itself and possibly certain minor fees related to the sale.
1. A national dealership network is at minimum, a soft-guarantee that your car can be maintained/recalled/fixed without you jumping through hoops.
Unfortunately, that soft-guarantee is saddled with all the other baggage of car dealerships. Pushy sales-people, extended warranties, predatory loans, etc.
2. It forces you to buy local, so not all the money flows out of your community, and into Detroit - some of it stays to circulate in your town.
3. People want to sell/trade their cars in, and Craigslist can be a pain in the ass.
4. People like to test-drive cars. People really like to test-drive used cars. See point #3. By the time Tesla starts holding used car inventories[1], and lets local buyers test-drive them[2], their 'showroom' starts looking less like an innovation, and more like a non-franchised dealership, where instead of the franchise owner skimming profit off the top, it just goes up the food chain, directly to corporate.
[1] Which they are.
[2] Which they do.
I think this is a kind of ‘broken window’ fallacy - ie unless there is a genuine service being offered then it’s kind of like requiring gardeners to use toe-clippers (ie the local economy are paying extra to hire people to do basically nothing).
> 3. People want to sell/trade their cars in, and Craigslist can be a pain in the ass.
Tesla offers a trade-in program so that appears to be similar in some respects?
I'm not going to argue with you as to whether or not the theory behind it is correct (my feelings on the subject are complicated), but I will point out that there's a major political movement in this country to 'keep it local', that has varying degrees of support in varying levels of government. Regardless of whether or not this desire is correct, whether its organic, or whether its simply manufactured through propaganda - it's present, and it gets acted upon.
> Tesla offers a trade-in program so that appears to be similar in some respects?
Which I address in point #4 - at the point where they start doing a major amount of business in trade-ins, they start looking like... A corporate-owned dealership, as opposed to a franchised one. A lot of the cost savings of 'show room-only' stores go away when you start having to deal with used inventory, scheduling test-drives, fixing cars in your dealership garage, etc.
Obviously, when they were first getting started, their used market was tiny, and none of those business needs/costs were present. But as their cars age/if they ever manage to successfully sell more models/if they somehow manage to capture a major chunk of the overall auto market, their 'stores' will have to offer pretty much every service that a traditional dealership does.
In recent years there has been meaningful investment and growth in Detroit [0], but a lot of auto money is in surrounding areas like Grosse Pointe [2] and Oakland county [1].
[0]: https://fred.stlouisfed.org/series/DETR826PCPI
[1]: https://en.m.wikipedia.org/wiki/List_of_Michigan_locations_b...
[2]: https://en.m.wikipedia.org/wiki/Grosse_Pointe,_Michigan
Edit: mentioned Grosse Pointe
It's not that I enjoy haggling with car salesmen, walking out the door and getting hunted down in the parking lot like an animal... I don't... in fact I hate it. But at the end of the day I get a deal I'm satisfied and comfortable with - and it's always below MSRP - far below.
I think what we're seeing here is a combination of the younger generation's fear of conflict (a negotiation is an adversarial conflict), coupled with car manufacturers realizing a lot of people are totally OK paying $10,000+ over MSRP... almost "bidding" for a car.
I fully expect prices to increase, while overhead decreases (no sales staff, no stale inventory, no loss of inventory, rent payments, etc). But the younger generation will feel great because they got to click a button and a grossly overpriced car shows up the next day - just like "Amazon but for Cars!".
I can't see any positive coming out of this. You don't buy anything over a few thousand bucks without negotiating. Even the photo copier at your office was negotiated for days or weeks... how can someone buy a $50,000 vehicle at MSRP/Invoice price and claim they didn't throw away money?
It used to be only suckers walked into a dealership and paid sticker price... bigger suckers payed more than sticker price (gotta have that undercarriage coating), and everyone else paid closer to the true price having researched what similar vehicles sold for etc.
You would only feel ripped off because some dealerships say "No Haggle" and some do haggle. If every dealership has the same price for a specific car then literally by definition you cannot get ripped off.
You're also fixating too much on the meaning of MSRP. Before the car shortage MSRP was basically just a marketing number to anchor negotiations at a high number (except for cars in super high demand). Some automakers were notorious for deeply discounting below MSRP and some didn't discount much.
Yes, there might be outliers where an extremely good haggler paid less, but that would be outweighed by a novice who paid way more, and the average has to be higher because of the higher overhead.
If I see a widget and the widget meets my needs and the widget fits my budget and I buy it, I don't care how much profit they're making. Why does it matter?
I think the act of feeling ripped off or having to make sure someone only makes a certain amount of profit is a path that leads to anxiety.
I don't haggle over the price of gasoline or milk. It's not because the price is low. It's because the identical product is available from a dozen local merchants and I know which is cheapest or which has the best lit parking lot or which has self-checkout. Price becomes so standard that merchants try to compete in other ways. And for those that do choose to compete on price, $0.05 difference on a $5 item is a big gap.
Since I'll know a fair price of the vehicle before I run across that, I can determine if it is a "ripe off" or a fair market price, with far less hassle/wasted time. I'd always buy from a no haggle dealership if the price was competitive (and my last vehicle purchase was exactly that, it was +-$1K from normal price based on vehicle loan records).
The younger generation doesn't necessarily fear conflict. Just look at how it's winning the conflict about conflict against the older generation.
They (we) want to reduce these kinds of negotiation because they give an economic advantage for entirely arbitrary reasons: someone getting a car cheaper because they negotiated harder or getting a better job offer because their trust fund allows them to walk away with ease does in no way benefit society. Whatever they save, someone else has to pay extra to make the system work for the dealerships.
Worse, the ability to negotiate is not some random variable. It's tied to aggressiveness and a sense of entitlement. It's a lifelong rebate for bullies that practiced that sort of thing by stealing younger kids' lunch money. And the only reason it has survived as long as it has is because that happens to be the demographic car salesmen also hail from.
Worst, it isn't even just about someone's ability to assert themselves: a salesman may well react entirely different to the same exact words and behavior based on criteria that would invoke laws against discrimination in other cases. I remember a number of stories of black homeowners being quoted 30 % when having their homes' resale value assessed. Don't remember seeing any tests for car sales, but I'd be surprised if it didn't replicate there: be a white broad-shouldered tall good-looking man and your lowballing makes you a strong opponent. Lack any of those criteria and it's considered an insult to the profession and you get the cold shoulder.
Try to haggle down the price of a bean burrito at taco bell and see how much fun that is. There are all kinds of bean burritos to choose from in mi barrio, but they aren't budging to make a deal.
The same people haggling for cars are paying over asking on house bids.
I've haggled at a guitar center, but then I can't do the same thing at a hot topic when I pick up my chain jeans.
It's a weird game, but more bragging than haggling. The sense of satisfaction at having bargained it down is a pretty good rationalization after you've purchased.
One thing is certain - the more middle men you have, the more expensive it will be.
In practice ... well, maybe everyone makes more money if no-one undercuts each other too much. Is it collusion/price-fixing/anti-competitive? Or is it just good business?
this seems unfounded, with no way to ascertain it. and likely driven by some unconscious biases
I don't think the counterpoint has changed since it was codified in the laws of US states: limit the power of large corporations and their influence over sovereign states. Our ancestors were rather circumspect about corporate power within the US and created mechanisms to insulate themselves from that power.
The emergence of multinational corporations has naturally produced a similar model at the nation-state level: the ability of a global private enterprise to operate in some nation frequently depends on the existence of a domestic component, often in the form of a subsidiary with an obligation to retain executive staff that are citizens subject to the laws of the host nation.
My experience with dealers has been good. They've arranged financing competently, dealt with recall work, honored warranties and supplied OEM quality parts when needed. Nothing as complex as a passenger vehicle and all that goes into realizing one is ever perfect, but the dealers I've dealt with have met all of the expectations I've had of them. I suspect that much of the enmity towards dealers arises from unreasonable expectations. That's a suspicion. This isn't: the same people bitching about dealers today will be bitching at least as much about manufacturers when the dealers are gone.
At some point in this discussion someone speculated that the delegation of EV service to dealers is not viable due to the nature of EVs; the manufacturer must be directly involved or Bad Things will happen. That may be true. I don't know. I do know that, short of some form of mortal danger, I can't imagine a better argument to avoid EVs than that; I will never, ever own a vehicle that can't be properly serviced without the manufacturer's direct involvement. That would be deeply stupid.
Plus with cars basically becoming high tech batteries on wheels with dozens of minicomputers. When an EV really breaks down, I doubt your local mechanic can do much about it. At the most, he can swap out one module with another (if he has it). More likely the only thing the dealer can do, is give you a loaner car while the manufacturer ships the modules and components you need. Ford and Tesla are probably better off giving you a loaner car directly and when the parts are available instruct you to go to the nearest repair facility or in the worst case, the technician will come to you.
Competition. In a decent sized city you will get multiple dealers for the big names (Toyota, GM, Ford etc) and they will compete against each other. Because of this, you won't pay over MSRP, winter tires at cost, discounted warranties, free oil changes for life and they generally try really hard to keep your business through good customer service.
Think replacing local grocery stores with Walmart. Low end jobs stay, high end jobs go away. Further hurts small towns.
My guess is that a good chunk of the efficiencies from this model will go to Ford corporate so it’s a wealth transfer from small towns to big co managers / stockholders.
Guess what? The dealer sells multiple cars per day. You don't know enough to be a good negotiator against them.
Same thing as venture capital vs company founders. Founders found a couple of companies which do a couple of rounds each. VCs make way more investments.
Beyond that dealers provide distributed and localized inventory management. Modern car plants basically have to run at full capacity year round, but sales are much more seasonal and unpredictable given effects of gas prices and other economic factors, many of which can be regional. The dealers find underused land all over the country and have huge lots that allow for cars to be delivered on a consistent year round basis which provides efficiencies in the logistics operations since the trucking, shipping, and rail contracts can have permanent workforces and long term predictable contracts. When inventories pile up for specific models the manufacturer can provide incentives and dealers can innovate and adapt to take advantage of these using local knowledge of the conditions in their community in a way that manufacturers would have a harder time doing. Dealers can finance their floorplan using independent and local sources of capital for inventory and buildings which allows the manufacturers to extend operations without taking on additional debt, or putting their own finances at risk.
Some of these factors played more of a role in the past, when new car companies were building out their dealership networks and benefitted more from offloading risks to dealer partners. Tesla was able to innovate with their small showrooms in malls largely because they went for a long time with only a small handful of models, and because the buzz around the brand and vision meant that there has always been a waiting line (still the case), so they’ve never tried to compete for the “car broke down, need something new this week” market, which has had no choice but to head to well-inventoried lot.
Dealerships are very good for "try before you buy", "easy returns", "fast delivery", and "easy upkeep and repair".
They don't change anything for warranty, and they don't necessarily provide the biggest selection.
So I think best price is the only dimension that dealers could be worse at, but at the same time, you can often negotiate paying below MSRP with a dealer. I guess we're assuming most of the time they take a premium, but it's hard to predict what the prices would be if dealers didn't exist, would they be lower? By how much? Maybe they'd be higher?
The only thing about online orders that is pretty sure is convenience, you can buy a car in your bed and pyjamas, no need to talk to anyone, browse online and purchase, car arrives at your door.
Forcing dealers to do repairs only effectively meant risking that best dealers would switch to other brands, other dealers would have to charge more for the service and these two factors could potentially kill any brand. No single manufacturer could pull it off, and even if they could find a way to work together to change legislation, it would be way too costly and way too risky.
2. Trade-ins. Most new car dealers also sell used cars (in fact many make more profit on used cars than with new cars). Because of this they can usually give you much better trade-in valuations than Tesla, which I believe just sends cars to auction. Obviously you could also just sell to CarMax/Carvana/etc. or sometimes sell a car to a dealership without buying a car. But this is an added bit of hassle.
Once you break it down, dealerships not a combination of businesses that really needs to be together, IMO.
Proximity and diversity. How are you going to have direct sales depots in every random town in the world? And which towns get which brands? Makes no sense.
How about The Internet? Might work…
The big 3 auto makers are all located in Michigan, USA. If they sold a vehicle direct, the sales tax dollars goes to the State of Michigan. Which means all the other states are missing out on *significant* tax dollars.
To force each state to get tax dollars, local dealerships were established. That way tax dollars go to the state the vehicle is sold in, rather than the state the vehicle manufacturer is located in.
I'm curious if this has changed at all over the last 20 years with the rise of e-commerce. For example, when I order a product on Amazon, do I pay taxes on that product for where I live (where the product is "purchased"?), or where Amazon is headquartered?
https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.
> The big 3 auto makers are all located in Michigan, USA. If they sold a vehicle direct, the sales tax dollars goes to the State of Michigan. Which means all the other states are missing out on significant tax dollars.
Also, this is not how it ever worked. Sales tax was and is never owed to the state the business is operating from. That is why buying online resulted in being able to evade sales taxes for many years, until the above Supreme Court ruling.
I wrote evade above, because the other states were not technically missing out on tax dollars. All states with sales tax have a “use tax”, which is owed to the state for bringing in merchandise that you have paid less tax on than if you were to have bought it in the state (Florida might be the only state without use tax for online purchases).
However, pursuing people for use tax for small items is a costly endeavor so most people get away with it. But a car is easy, since it has to be registered, the state can easily demand the use tax before making it road legal, and they do (for example when you buy from a no sales tax state and then take your car to be registered in another state).
I lived in Virginia, bought a car in Delaware... no sales tax in DE. Wohoo? No, had to pay Virginia sales tax when registering the car.
To answer your question though, you pay tax to the state it is delivered to when ordering from Amazon.
I just bought a car from an Oregon dealership, but I live in the state of Washington, and that’s where the vehicle is registered.
Washington got every cent of sales tax from the sale, and Oregon didn’t get anything.
You absolutely pay local sales tax on amazon, not Washington salestax. Taxation is about nexus of transaction.
And many dealer families run multiple brands under one name.
I had a Subaru, and Subaru had a problem for a decade+ that their head gaskets were tissue paper and frequently failed. So I had one free replacement mid-warranty.
I went in just after the warranty expired for a normal service and lo and behold, the head gasket was bad again. The dealer replaced it for free. What happened? They defrauded Subaru.
So sure, there's an advantage. Not only will a dealer happily be aggressive at any warranty repair, they'll even commit fraud doing it.
Sometimes manufactures will direct dealers to fix things that are long out of warranty when weird things happen (like in Seattle when that radio station sent out a bug that bricked the radios over RDS -- the manufacture directed the dealerships via a service memo to replace the radios and bill the manufacture).
Service is a decent part of most dealerships these days, and a good amount of that income is driven from warranty claims.
Now societal. Sure, car dealerships may be “predatory” (I argue against that, some may be but most I’ve dealt with are opposite of that because they want your business), but at the end of the day it allows for more people to have jobs and participate in the economy. At some point we, technologists, are going to remove everyone’s job from them and we’ll act surprised societal uprisings happen because there’s no jobs available to the average Joe. Now I’m not arguing against automation, but car dealerships employ millions across the country, I don’t think removing those jobs from our fellow citizens who may or may not be able to do much more than sell cars, to no fault of their own, just to make a few more dollars for the manufacturer at “ease of the consumer”.
Once again these are my opinions, I’d love to hear from people who think this could be a good model for selling vehicles and will take them into full consideration.
A lack of dealerships does not mean that there are no showrooms or test drives. There's nothing stopping Ford, BMW, Mercedes or whoever from putting in a showroom next to a Tesla showroom. In actuality it makes it easier since a showroom doesn't have to have inventory; you can put them in places where a normal car dealership couldn't exist (this is exactly what Tesla is doing). I saw a Genesis showroom in an airport once...
It's not like selling a car is a super specialized skill. We're also at very low unemployment. The people who were selling cars can switch jobs. People switch jobs all the time. Losing a job generally doesn't prevent someone from participating in the economy.
Mechanics can open their own shop or work at a Pep Boys. Likewise, the underwriters can work elsewhere, probably even remotely.
At some point we, technologists, are going to remove everyone’s job from them and we’ll act surprised societal uprisings happen because there’s no jobs available to the average Joe.
This is a problem of late stage capitalism, not technologists or automation per se. A job is only mostly a requirement to have your needs met because our society says it is. It doesn't have to be that way.
So literally nobody likes the dealership sales model. Even in the 90s the old buyers hated it too.
The only reason it still exists is because of successful lobbying by dealer networks over 70+ years ago to codify their business into law.
Based on what metric? I have a hard time looking at Tesla's sales, revenue, profit, production capacity growth and not thinking they will continue to be a leader in EVs far into the future.
you’re the leader and category creator until one day you’re just another player in a sea of competition
There's no hatchback, mini, SUV, or truck models available yet... And it feels like Tesla is even further behind in these areas because they are not giving any roadmap details (that I've heard of), while other companies have offerings available now.
I hope Tesla can remain a market disruption and continue to push people to electric, but they currently are a one trick pony (which isn't a bad thing, it let them enter the space)... But as a one trick pony, I would agree they do not currently "look like THE future of EVs"
Ford competes directly with the Y, and also in an entirely new segment Tesla does not compete in -- the pickup.
Chevy has the pickup coming, and already competes in the affordable compact car segment (27K MSRP for a Bolt? That's getting into 'excellent value' territory) that Tesla does not compete in. GM also has the Hummer, which is blazing an entirely new trail.
Then you have VW, Kia, Polestar, etc. Tesla has a nice head start, and a good charging network, but rivals are catching up fast and will end up outpacing what Tesla can offer. The Model S is aging, with no apparent revamp in sight, and if the Model 3 follows that same pattern then Tesla is quickly going to look outdated while the competition is one-upping each other in new designs.
There's also a fair number of people who do care about reliability, don't want a touchscreen dashboard, don't care about fart gimmicks, and want windshield wipers that just work. AP is no better than the competition, and FSD is a gimmick that appeals to a very particular kind of buyer.
I enjoyed my P3D but have no expectation I will buy another.
Well, personally, based on Elon Musk's Twitter. Unless he is leaving the company very soon, he's going to take the company down with him.
From a more technical perspective, they're literally the only EV manufacturer selling cars in the US without a CCS connector. (With the minor exception of Nissan, who have already announced that the Leaf will switch from Chademo to CCS.)
And finally, from an "I actually own a Tesla" perspective. I would never buy another one. Not because of the car, which is fine, but because of the service experience. It's awful. It's so bad, I have trouble putting into words how terrible it is. I live in fear that something will go wrong with my Tesla again, because getting it fixed will be yet another nightmare.
[0]: https://www.washingtonpost.com/business/2022/02/12/ford-gm-d...
The latest communication is that order banks will open in January. Ford will be sending invitations to build / order in waves as to keep up with the demand. The invitations will be prioritized based on reservation time stamps. Your reservation is number 138 at our location. I have no way to track where you are in the total reservation list. Once 2022 model orders have been fulfilled, Ford will start the process over again. They expect to start taking orders for 2023 models about mid next year. Given the demand and number of reservation ahead of you, it is reasonable to think that you will not be able to order until mid 2022 for a 2023 model. I also need to mention that Managment has indicated there will be an addendum added to the MSRP. We are expecting that to be about $10,000 but could be a little lower or higher dependant on supply vs demand.
I'm done with dealers. I recently helped purchase a car for my father after his was totaled. I talked to dealer and he promised that they are selling at MSRP. Next morning I call him and he wants above MSRP unless I RESERVE NOW. I told him I'm no longer interested in doing business with him and went elsewhere.
My only concern is where all the scumbags are going to end up if car dealerships cease being a thing.
If some dealership gets sanctioned by a manufacturer for being jagoffs, they'll put up a new sign next week and be a Toyota (or whatever) dealership. The manufacturer knows this and won't alienate them for one customer.
I loved that car, drove it until it the wheels fell off.
Point being, Tesla is hardly the first one to pull off this model.
https://www.toyotaofrichardson.com/blog/2016/september/29/a-...
Also, it no longer exists. Dealers don’t like it because they make less profit off Scion cars. The incentive wasn’t there. You can see how it is different than the direct model Tesla use, and Ford is contemplating to adopt
And true Scion as a brand no longer exists, but it lasted pretty long.
In this case, Ford is not saying away with the dealerships - they're looking at them as distribution hubs, basically...like Scion.
The last new Ford I bought from a dealer was a 6 hour experience. I came ready and got my vehicle for 3 percent over invoice and avoided all the cost pack ins at contract.
It was brutal. And I used sales skills, as a buyer, learned from high octane types that get that money no matter what.
In the years following, people gladly paid me $1k, plus a percent of the savings off MSRP, to buy cars for them.
Did that a few times for a little extra spiff on my vehicle buy.
Was a Ford Expedition, 2000 era vehicle. Those are made on the F150 platform and are great outdoors rigs, though I won't ever get another one, nor a new vehicle from a dealer again.
Someone will make an EV Expedition type rig. Probably Ford will and I want it.
People paying non trivial money to avoid the dealers is exactly why Ford is doing what they are doing.
They will sell very well
yep: https://carbuzz.com/news/ford-mustang-will-go-all-electric-i...
There are a lot of people who commute in a sedan and have a Tacoma or Odyssey that gets driven when needed and would replace both with a fullsize crew cab truck if it weren't for a little voice in the back of their head telling them that such a vehicle does not project an image that is appropriate for the kind of person who lives in a million dollar home with solar on the roof in a neighborhood dotted with black lives matter signs.
An EV variant drops that stigma and will attract a bunch moneyed buyers who previously would never have considered a fullsize truck. That's huge.
If car companies are going to compete in the future they will have to either eliminate dealers or at least force some type of structure to the sales process, otherwise people will gravitate to the companies that do (like Tesla).
Just a worse consumer experience that reflects poorly on the brand? Sony seems to deal with it with sold-out ps5 and resellers gauging.
I mean you're not the only one suggesting this is a problem. Ford clearly seems to have a problem with dealerships and their markup I guess (or I misread the article).
I put in the order through Volvo online, and they confirmed the build sometime the middle of last year.
Volvo had an online order tracker, that shows progress from order acceptance to the car being in production, etc. But it was never actually updated. I was a little worried the car wasn't going to show up before my existing lease was up in June. So I contacted Volvo customer support in early March and they surprised me by telling me the car was going to be delivered to the dealer the next week. I had heard nothing from anyone in months, so that was a big surprise.
I called the dealer, who I'd never talked to until that point, and they confirmed the car was coming in the next week and setup an appointment to pick it up. Because used car prices are crazy they could also buy out my leased ICE Volvo and give me a bit of money back for it.
So the price I paid (another lease) ended up including the new C40 at MSRP, minus trade-in, minus CA EV credit, minus Federal EV credit, and minus a Volvo loyalty discount.
It wall worked out pretty well, but would have been nice if their order status page actually showed order status. I imagine it was a manual process to update it and somehow that wasn't getting done. I heard from other they had the same experience.
> In the United States, direct manufacturer auto sales are prohibited in almost every state by franchise laws requiring that new cars be sold only by dealers.
If they keep making the right moves, and improving the whole Ford EV experience, I might be inclined to purchase a Ford EV next time instead of another Tesla.
The smaller dealers in little towns are completely screwed. They'll probably perish and be replaced by the manufacturer's online presence. Perhaps local "mobile bike repair" outfits will pop up to do local assembly and support.
The status quo, where prices are negotiated at dealerships, allows car companies to keep their real prices secret, and allows them to get more money from consumers who are less comfortable negotiating or don't have the time or energy to figure out what the real price should be. Fixed pricing will be higher for some, but it will also be lower for many. Fixed pricing also makes it much easier to compare prices across brands, which should result in a more competitive market.
What is Ford's plan for dealerships? Tesla has dealerships too right? I walked past the one in Red Hook Brooklyn. Or maybe that was just servicing? But they did have new cars there.
And why won't Ford be advertising EVs? Super bowl ads always have car commercials. How else are they going to be able to tell people about the EVs? Unless they plan only to use their existing clout to attract people once they're already in the dealership or site?
Lots of questions.
Tesla has corporate owned stores, which are different from dealerships which are independent businesses. The staff there will help you order a car, but ultimately they're just clicking through the website with you. All orders are processed through the website, and go into the same central queue.
And they’re pissed at dealers doing markups I bet.
I say this because approx every month I get a postcard from a local dealership that references a car I haven't had for 12+ yrs. My sense is, many dealerships are highend mom & pops. That is, they suck at marketing.
That doesn't benefit the brand.
Fixed price means what it says - no negotiation, just a fixed price.
Advertising is probably unnecessary. Word of mouth more than exceeds their production capacities.
What's the bottleneck with Ford building electric powertrains? Is it still the semiconductor shortage? Batteries? Production tooling?
Just was talking to someone today from Ford and chatted about that story. I said how much are you going to pay the dealer for every EV sold in their territory? He said nothing like that has been in the press. I teased him that's not exactly a denial. Are they going to be paid something to have EV's in the showroom or available for test drives? I was told you will have to wait and see.
Dealers aren't going to need the amount of real estate they've got now. Dealers make the most money from service, used cars and finally new car sales. I have noticed that some dealers have made the investment to service EV's which includes training and a minimum of two charging stations.
But some dealers have chosen not to do so. I would imagine the dealers not moving to service EV's are at some point in the future going to take a buyout and close their dealership, but that's just a guess.
Oh, I think it's pretty clear that unless this strategy goes totally off the rails, that's definitely where they're heading. It'll converge (albeit at different rates) with the shift away from selling non-EV products altogether.
Apart from the obvious and immediate profit bumps, there's knock-on effects, such as not forcing your customers to deal with the second least trusted profession in the USA. [1]
[1] https://www.forbes.com/sites/niallmccarthy/2019/01/11/americ...
This puts some real pressure on dealerships to change, as we slowly transition to a more EV world.
[0]https://www.npr.org/2022/03/02/1083913314/ford-modele-split-...
The dealer model (not just for cars) may have been a “good thing” once upon a time. When I talk to older generations, they always seem taken with the idea of a “good dealer”, someone to “take care of you.” But by and large (there are some exceptions), dealer model seems to have generally become less mutually beneficiary. In most domains, I loathe them.
Their idea of a "good dealer" was one who only ripped them off moderately.
I don't understand why this is newsworthy? I bought a non-EV in the last decade by putting the order together online on the manufacturer's national website, then processing it through a dealership.
Buying a car in the US was so unnecessarily stupid because of all the haggling and pussyfooting around what the damn thing is actually going to cost.
All credit goes to Tesla.
Buying a car with option to customize, same fair price everyone pays and ordering online without talking to anyone is the way to go!!!
Sure, some dealerships are solid but when ‘used car salesman’ is a trope, you have a problem. The current supple deficit and resulting dealer markups are a direct result of a short term perspective that damages the overall brand in the long run.
That’s my day job, thank you. I’m paid for bringing out actual actionable intelligence from such things and I’d like my personal life to be easier.
Dealerships are important as showrooms, service centers, a place to sell (slightly) used cars with brand warranties etc.
Yes. Especially because Uber and Lyft closing business is just a matter of time.
The overhead of HQ servicing each dealership is (approx) fixed. Some cover that with plenty to spare, others might be barely breakeven (after dealer incentives et al).
That said, even 20% of 3k is still 600 so that does feel like a positive for Ford (even without the dead weight).
- I have nothing against such model IF I can test-drive for free the vehicle, so if some vendor bring the vehicle to my home, 24h test, they'll get back no question asked, totally free;
- I understand big car industry want to use modern surveillance capitalism for target sells, not much an issue since we already know how this system work;
- IF they also provide on-side under-warranty service... They buy back used vehicles with someone who came and evaluate locally... It might be even good IMVHO.
It's clear the society at a certain level have shifted back to a direct producer-to-customer model, witch might be perfectly good IF is general supported by standard means, or might be a way to exploit consumers and intermediate OEMs like happen in many cases (cfr. Amazon, Wallmart etc to cite USA examples). The whole issue is probably a whole society comprehension of such model and I doubt there is such understatement without people training...
Giant already does this with bikes, in my area. They rent out carpool lots in low periods (weekends, basically) and people come from all over to check out their bikes.
Sure it's a little less instant gratification, but I wouldn't mind waiting a couple weeks for a Mazda pop-up to come by if it ends up being cheaper than a dealership.