[packout]

Ford is establishing it own network for selling their EV offerings outside of its current dealership network. Most states have carve outs for this to occur, but I suspect it will still be challenged in court by the dealerships. It will be some years before this comes to full fruition and I wonder which other manufacturers will follow suit. Ford wants to be able to capture the 10% profit margin and avoid the negative reputations of the dealerships. This is a huge move that may bring a massive shift in how we purchase vehicles, beyond more on-line ordering. Not sure that we will like it, but I wonder how Subaru will be choosing to maneuver through this.

"Ford wants a certain number of dealers to opt in to a new Model e sales model. Model e dealers would not hold inventory. Instead, they will facilitate the delivery of online orders, much as Tesla does for their customers. Electric vehicles will be sold at non-negotiable prices. That’s just one step away from direct-to-consumer sales."

article
non-franchise dealership agreements in a state for EV is all that is necessary.

Press release

 

[AgentK]

I think that is the future and personally I like that idea. The dealer is an unnecessary middlemen, plus they are no longer mom and pop dealerships who needs protection from the big bad car manufacturer, most of them are huge dealer groups. All we actually needs is a place to test drive cars and then go home decide and make the purchase along with all the paper work online and get the vehicle delivered or pick it up when ready. At least that's my personal preference, if I needed to choose to make an order online and pick up the vehicle from a dealer farther away or go do it in person, online all the way.

 

[packout]

I think that is the future and personally I like that idea. The dealer is an unnecessary middlemen, plus they are no longer mom and pop dealerships who needs protection from the big bad car manufacturer, most of them are huge dealer groups. All we actually needs is a place to test drive cars and then go home decide and make the purchase along with all the paper work online and get the vehicle delivered or pick it up when ready. At least that's my personal preference, if I needed to choose to make an order online and pick up the vehicle from a dealer farther away or go do it in person, online all the way.

certainly, the future has growing online transactions, but I am not sure that it benefits us to have manufacturer direct versus the dealer. there are many buyers who can not at all, or effectively can not transact through a computer. some benefit from a face to face conversation. Often the information on-line is not sufficient to a buyer and requires additional information. We of course will still need a network for repairs.

the option of on-line orders is very different from whether this occurs via the dealerships or direct. this will not change the price to the buyer.

 

[Jim_in_PA]

Related article that 'splains why the vehicle business has been structured like it is...

Why car shopping is so bizarre in the United States

The way we buy cars in America is just weird.

www.cnn.com

 

[AgentK]

certainly, the future has growing online transactions, but I am not sure that it benefits us to have manufacturer direct versus the dealer. there are many buyers who can not at all, or effectively can not transact through a computer. some benefit from a face to face conversation. Often the information on-line is not sufficient to a buyer and requires additional information. We of course will still need a network for repairs.

the option of on-line orders is very different from whether this occurs via the dealerships or direct. this will not change the price to the buyer.

Yeah it will probably be a transition, which I look forward to.

Regarding whether or not it will change the price, O don’t know, removing unnecessary middleman will make room and tools for competition among manufacturers. Or the very least boost car manufacturers stock prices due to higher profits, so buy stocks

 

[packout]

Yeah it will probably be a transition, which I look forward to.

Regarding whether or not it will change the price, O don’t know, removing unnecessary middleman will make room and tools for competition among manufacturers. Or the very least boost car manufacturers stock prices due to higher profits, so buy stocks

not much difference between an online sales force within the manufacturer versus the dealership. the individual sales force still needs to be compensated in some manner. The standing inventory issue is an entirely different matter. The dealerships still need to offer test drives, warranty work and general auto repairs. I do not think the sales force, particularly the online sales force has an associated high fixed overhead. Most of it is variable overhead which would remain regardless under whose roof they reside.

 

[xydadx3]

not much difference between an online sales force within the manufacturer versus the dealership. the individual sales force still needs to be compensated in some manner. The standing inventory issue is an entirely different matter. The dealerships still need to offer test drives, warranty work and general auto repairs. I do not think the sales force, particularly the online sales force has an associated high fixed overhead. Most of it is variable overhead which would remain regardless under whose roof they reside.

Do they though?

If I buy a phone online there's a return period. If I buy a Tesla I believe there's an initial return period as well...at least in theory. Salesmen may just become unnecessary middlemen (non-gender specific, but "salespeople" sounds stupid). If electric cars give consumers an experience as expected when they browse online, people will just buy them without the need for a test drive. Think about all the Kia's, Toyota's, Chevy's etc out there...they're just mundane run of the mill rides...owners don't give a hoot how they drive, just that they DO drive. Inventory is just a matter of where to store a calculated number of vehicles for a reasonable time before more can be produced...similar to how Chick Fil A keeps customers flowing. Hopefully in the future production will be more predictable again.
I agree with the service aspect. Dealerships may have to shift to that being their primary role...assuming electric cars even need much service besides teaching the features.

 

[AgentK]

not much difference between an online sales force within the manufacturer versus the dealership. the individual sales force still needs to be compensated in some manner. The standing inventory issue is an entirely different matter. The dealerships still need to offer test drives, warranty work and general auto repairs. I do not think the sales force, particularly the online sales force has an associated high fixed overhead. Most of it is variable overhead which would remain regardless under whose roof they reside.

You don't need much online sales force, most of times when I came to a dealer they had employees standing around doing mostly nothing, waiting for a customer or waiting for something to do, if most sales go online you don't need these folks. But the bigger problem is with the ownership of the dealership, they are not looking to get a salary for running the show, they are looking for millions in profits, they are the real overhead. And yes, inventory is another major point, the workforce needed to care for these cars and real estate is a huge waste. As 'new' older folks become more tech savvy and used to doing things online the need for those in person conversation with sales folks is going to be less needed, if at all. As for warranty work and repairs? it doesn't even have to be done at a dealership, for example I used to live in Israel and overthere the place you buy a car and mechins shops that will fix your car are completely unrelated to each other, different locations and owners. The are manufacturer certified mechanic shops where you go for warranty and if you want a more professional yet more expansive service and that's all they offer.

 

[packout]

You don't need much online sales force, most of times when I came to a dealer they had employees standing around doing mostly nothing, waiting for a customer or waiting for something to do, if most sales go online you don't need these folks. But the bigger problem is with the ownership of the dealership, they are not looking to get a salary for running the show, they are looking for millions in profits, they are the real overhead. And yes, inventory is another major point, the workforce needed to care for these cars and real estate is a huge waste. As 'new' older folks become more tech savvy and used to doing things online the need for those in person conversation with sales folks is going to be less needed, if at all. As for warranty work and repairs? it doesn't even have to be done at a dealership, for example I used to live in Israel and overthere the place you buy a car and mechins shops that will fix your car are completely unrelated to each other, different locations and owners. The are manufacturer certified mechanic shops where you go for warranty and if you want a more professional yet more expansive service and that's all they offer.

warranty work sometimes requires expensive specialized equipment that would not be justified unless the auto repair shop was specialized which in effect is a dealership without the sales force. I think the scale is very different than Israel and it does not translate well to the US. They still will need test cars for buyers, and some infrastructure for F & I. Nothing really changes for the buyer in terms of the overhead that translates to purchase price other than holding inventory. consumers are going to want inventory so they can go somewhere and immediately drive home a vehicle. The only difference here is some manufacturer moving the profit from dealership to in house, but the profit remains and is paid for by the buyer.

 

[Landshark]

You don't need much online sales force, most of times when I came to a dealer they had employees standing around doing mostly nothing, waiting for a customer or waiting for something to do, if most sales go online you don't need these folks. But the bigger problem is with the ownership of the dealership, they are not looking to get a salary for running the show, they are looking for millions in profits, they are the real overhead. And yes, inventory is another major point, the workforce needed to care for these cars and real estate is a huge waste. As 'new' older folks become more tech savvy and used to doing things online the need for those in person conversation with sales folks is going to be less needed, if at all. As for warranty work and repairs? it doesn't even have to be done at a dealership, for example I used to live in Israel and overthere the place you buy a car and mechins shops that will fix your car are completely unrelated to each other, different locations and owners. The are manufacturer certified mechanic shops where you go for warranty and if you want a more professional yet more expansive service and that's all they offer.

As far as repairs go, it's the same here in the US. I don't take my cars to a dealership for repair unless the repair is related to warranty work. I have an older subaru (2004) and have only taken it to the dealership once (ironically the one and only time the car leaked oil...they forgot to properly tighten the oil drain plug). Every single other repair/maintenance has been done at independent shops that I trust more than a dealership.

One benefit of salespeople and dealerships that I could see argued is the increased sales as a result of them existing in the first place. The experience you have as a customer exploring vehicle options is often more important than the vehicle itself. You end up with a lot of 'word of mouth' customers which should increase revenue for that specific dealership. This loops back to having competition between dealerships/lots.

Just thinking out loud, not making a stance one way or the other.

 

[TheRaven]

Related article that 'splains why the vehicle business has been structured like it is...

Why car shopping is so bizarre in the United States

The way we buy cars in America is just weird.

www.cnn.com

Thanks for sharing that, Jim. Definitely an interesting read.

 

[AgentK]

warranty work sometimes requires expensive specialized equipment that would not be justified unless the auto repair shop was specialized which in effect is a dealership without the sales force. I think the scale is very different than Israel and it does not translate well to the US. They still will need test cars for buyers, and some infrastructure for F & I. Nothing really changes for the buyer in terms of the overhead that translates to purchase price other than holding inventory. consumers are going to want inventory so they can go somewhere and immediately drive home a vehicle. The only difference here is some manufacturer moving the profit from dealership to in house, but the profit remains and is paid for by the buyer.

That's exactly what I'm saying they have in Israel, a dealership without sales force. For example a Suabru certified shop will work ONLY on subaru, just like a dealer would but they sell cars, and a a real dealer will sell you a Subaru but it can't fix it. I don't see how scale changes things, anyway I look at it it benefits both the consumers and the manufacturers in the US.
Again, I'm saying it's going to be a transition, not a flip of a switch. What Ford is doing seem to be the right thing, switching over some of it's sales operation online so you can go either way, you need a car now? go and get one from old school dealer, don't want to deal with a dealer? get one online. If the online method picks up I'm sure they can find a solution for old style dealer service, like getting a car immediately, for example one centralized location where they have inventory ready to go at probably a higher price.

There is such thing called economies of scale, the higher the scale the higher the efficiency, at least in economics. Even if Ford changes nothing just makes all dealerships their own they now have few millions each year that would have gone to the investors or owners of these dealer groups but now they can either take in as profits, OR they can use in to improve their competitiveness with other manufacturers, people do cross shop and some go for the better deal, if one can offer the same car for lower price yet still be profitable they might do that, it's a market after all.

 

[Ruben Marin]

I don't agree that a dealer of any kind or form is necessary there are always ways around having a physical fixed location, tow trucks for example, can bring a loaner vehicle then take the malfunctioning one to a service center, no need to have a customer take it and wait around for hours.

 

[packout]

I don't agree that a dealer of any kind or form is necessary there are always ways around having a physical fixed location, tow trucks for example, can bring a loaner vehicle then take the malfunctioning one to a service center, no need to have a customer take it and wait around for hours.

the fixed location is the service center. another or same fixed location(s) for viewing and test drives, another fixed location or the same for the tow trucks since there are not enough independent tow trucks for existing work and to move around loaners.

As I noted, nothing changes except the ownership of the necessary infrastructure, therefore the costs are the same or possibly even more.

the only characteristic of a dealership is that it focuses on one brand. In fact with a dealers group that encompass multiple brands they may be able to reduce some overhead by sharing certain infrastructure resources.

 

[AgentK]

the fixed location is the service center. another or same fixed location(s) for viewing and test drives, another fixed location or the same for the tow trucks since there are not enough independent tow trucks for existing work and to move around loaners.

As I noted, nothing changes except the ownership of the necessary infrastructure, therefore the costs are the same or possibly even more.

the only characteristic of a dealership is that it focuses on one brand. In fact with a dealers group that encompass multiple brands they may be able to reduce some overhead by sharing certain infrastructure resources.

The good thing is that we don't need to guess, Tesla is already doing it and it seem to work awesome for them otherwise they can easily change their model of selling and servicing their cars.

 

[packout]

The good thing is that we don't need to guess, Tesla is already doing it and it seem to work awesome for them otherwise they can easily change their model of selling and servicing their cars.

Tesla is not a comparison for a number of reasons. For one they only sell EV and they have zero ICE legacy dealerships to deal with.

Tesla has just under 3% of US market share. They are in no position to scale up with what they now have if they had to.

Tesla owners are always complaining of the service problems. Long wait times. There are five Tesla service centers in Colorado and dozens of Subaru dealerships ready to service out vehicles. Additional independents are also available.

I certainly would not hold up Tesla as a model to replicate for the rest of the auto market.

Tesla has a captive market since they have restricted others servicing their vehicles.

 

[Ruben Marin]

Tesla is not a comparison for a number of reasons. For one they only sell EV and they have zero ICE legacy dealerships to deal with.

Tesla has just under 3% of US market share. They are in no position to scale up with what they now have if they had to.

Tesla owners are always complaining of the service problems. Long wait times. There are five Tesla service centers in Colorado and dozens of Subaru dealerships ready to service out vehicles. Additional independents are also available.

I certainly would not hold up Tesla as a model to replicate for the rest of the auto market.

Tesla has a captive market since they have restricted others servicing their vehicles.

And those complaints are echoed across nearly all vehicle brands, lol.

 

[packout]

And those complaints are echoed across nearly all vehicle brands, lol.

not even close. I have never waited more than two weeks for a Subaru appointment and if I stated it was important I would get in within that week.

 

[dtrac47]

If it would eliminate the finance experience I'm all for it. When we bought our new Touring in January I told the salesman I would not tolerate a 30 minute pitch on why I needed to buy a service contract. I guess he must have said something because we were in and out in 5 minutes and a very low key experience.

I've bought 2 bass boats in the past 5 years and most manufacturers set the price for the dealer. No negotiations, just here's the price, take it or leave it. The only difference in a dealer's price is the cost of shipping, which increases with distance. Seems like we are already headed that direction with the MSRP pricing many dealers are doing.

 

[AgentK]

not even close. I have never waited more than two weeks for a Subaru appointment and if I stated it was important I would get in within that week.

Tesla had growing pains for a few years, maybe still do. These days with the supply chain issues I’ve seen posts from car manufacturers about waiting for parts for weeks.