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Comment by woodchuck64 | Hacker News Reader

Maybe they would prefer to kill dealerships (saving customers $2,225 average per new car according to a 2000 report). Lord knows, I've never had a good experience with a dealership, let 'em die!

http://www.washingtonpost.com/opinions/charles-lane-tesla-ta...

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But if manufacturers have no competition for dealerships (because they own them all), what would keep them from jacking up the prices?

If Tesla want to increase the price of Tesla cars for end customers, why would they need a dealer monopoly?

Manufacturers set the prices they sell their vehicles to the dealerships for, don't they? Unless the dealerships are going to start taking a loss on every sale, they aren't providing any restraint on manufacturer pricing. What keeps Ford from jacking up its prices is the Nissan lot next door, the year older Ford on the used lot, and the regional rail station down the street.

This American Life did a great story on car dealerships[0]. Basically, dealers have a number they have to hit every month, and they're basically incentivized to sell cars and be willing to take thousands of dollars loss to hit the number because if they get below the number they don't receive any bonuses, and the bonuses are the principal form of cashflow to both the dealers and salesmen.

[0]http://www.thisamericanlife.org/radio-archives/episode/513/1...

Obviously, no matter what perverted incentive/bonus system you have in place, the essence of selling cars to a manufacturer and by extension to a dealership is to charge more than it cost you to make or acquire the car in the first place.

Just because manufacturers can average it out across all dealerships doesn't make it less true, and obviously dealerships can never make a car cheaper, all things considered.

I worked at a Nissan dealership during college. We would occasionally sell a car at cost if a manager had been driving it around and had racked up too many miles on it. But we never lost money on a deal.

That just isn't true.

There isn't a lot of margin in cars anymore, but the cost of the car isn't the actual cost. There is lots of back-end money that determines the real cost. (just like PCs -- a big PC buy is own or lost over who Intel gives the biggest rebate to)

The only real exception is in a really bad economy where a dealer gets surprised by the evaporation of demand for an overstocked unit (ie pickup trucks in 2008-9). In those cases, they may sell vehicles at a loss for cash flow -- they borrow money to buy those cars in the lot.

Competition with other manufacturers?

What is keeping computer (or any other good) manufacturers from doing that?

The dying of third-party resellers and the rise of direct sales must be why consumer electronics prices are becoming so high.

What keeps them from jacking up the prices right now?

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