To address concerns related to dealership sales department closures and social distancing, Cadillac is offering virtual tours of its products via Cadillac Live and promoting its “Shop. Click. Drive.” online shopping, purchase and delivery program.
Wasn't this the very thing the automakers were against when Tesla came up with it?
Tesla does not have an independent franchise/dealership model, and all of their local presence is corporate owned. This is what all the automakers have been against, as there are a rats nest of local/state laws that require legacy automakers to not compete with/cut out their dealerships with direct-to-consumer sales, but Tesla has avoided that impediment by resisting having to adopt the sales framework the legacy manufacturers can't legally get out of.
That said, manufacturers would love to be able to adopt Tesla's model; dealers are the ones that hate it as it's an existential threat. Manufacturers are only against Tesla's model to the extent that they're not legally allowed to adopt it, so consider it an unfair advantage.
That doesn't means they have to like the dealer model, but there are real advantages to it.
(which is some sort of regulatory problem probably, the point is that it is the status quo for there to be a dealership oligopoly in many areas)
It's not really super convenient to get service 60 miles away.
Worse, Tesla is effectively a a national monopoly. And that's far worse, because it has no competition for sales of Tesla vehicles or service.
The manufacturer might like to claim the entire savings, but there are two reasons that typically wouldn't happen.
First, then the manufacturer's margins are higher, which changes the calculation of how much margin to sacrifice to increase sales volume. If before the manufacturer was making $2000/car and the dealer was making $2000/car then the manufacturer lowering the price by $1500/car to double their sales isn't profitable; double $500 isn't more than $2000. If the manufacturer is now making $4000/car by cutting out the dealership, lowering the price by $1500/car to double their sales is worth it; double $2500 is more than $4000.
And then second, because the competing manufacturers would have the same incentives under the same circumstances. If they lower their prices by $1500 to double their sales, that's coming at your expense if you don't do the same.
According to this [1], new car dealerships have a profit margin of 1-2% while auto manufacturers have a profit margin of ~10%. Anecdotally, some dealerships have no profit on vehicles, and rely on services contracts to drive profit.
I interpret this to mean that there is significantly more competition between dealerships than auto-manufacturers. If a consumer wants a specific brand, they can choose between dealers and often will travel long distances to get the best price. When a dealer buys a brand, there is a single supplier with global monopoly.
I think the disproportionate share of profit already going to manufacturers also undermines your argument on the trade-off between sales volume and splitting of profit.
In line with the above, private sellers are generally amenable to haggling because it doesn't matter that it doesn't scale. So when buying a used anything on Kijiji, haggling is expected, particularly if it says "OBO" (or best offer), but not if it says "firm".
If the price is set semi-arbitrarily at the time of purchase, like some U-pick auto junkyards, the person setting the price is right there anyway, so haggling may be acceptable.
I haven't researched any of this; this is just my intuition from experience.
Anyway, being able to advertise a price as firm does provide a convenient escape hatch in that scenario.
You'll often see this when selling used stuff in America. Poor people will haggle to the end of time because every dollar matters to them - something that manifests in selling something at a higher price being more risk-free than selling something at a lower price. For the same reason, if anything goes wrong with the used product they will be upset with you. Because every dollar counts to them.
I throw away cheap stuff instead of Craigslisting it because of the danger of it only being worth buying to poor people.
By the way, Americans prefer calling it 'negotiating'. You 'negotiate' a lower price, you don't haggle things down to a lower price.
They're baking in a fixed profit on used inventory and the customer has no option to impact their profitability and reduce acquisition cost. Now that I think about it, I am going to buy long terms puts on their stock,as this event should completely destroy their business.
Consider every dealership horror story you've ever heard. Both from customers -and- floor employees.
In both cases, having all dealerships across the country owned by the MFG means there's larger pools of workers to unionize, and a greater risk for a class action.
For years, I was aware of the cracks about "stealerships" and I didn't pay much attention, because I figured you get what you pay for and hadn't found a good independent mechanic. But I happened to see a help wanted ad for dealer advisors that mentioned commissions, about the same time as I had paid for an expensive repair on an out-of-warranty vehicle after dragging my feet quite a bit.
Maybe this is naive, but I genuinely did not know about the conflict of interest, and I expected the half of the dealer that sold (used) luxury vehicles to be no more predatory than the half that sells regular cars. On purchase, I figured, meh, I can afford the repairs, but I didn't count on paying for ones I didn't need and having ones I did ignored.
There are conflicts of interest everywhere in this process, as you might imagine.
But most dealerships are set up with a "service bay" that's just the desks of the service reps and a couple of parking spots, then after you leave they drive the cars around back to the actual service department. There's total isolation between the customers and the people doing the work. I suspect they might consider this a feature, "white glove service" or something, but it's irritating when you e.g. bring something in for diagnostics, and then get the diagnostic report from someone who doesn't understand half of it - an experience I have had repeatedly taking my lemon of a Nissan to the Nissan dealership because no one else in town has the stupid Nissan proprietary diagnostic computer.
Seriously, when I brought it in to have them figure out a problem that had been frustrating me for a while (I do most of the work on my cars myself), they confirmed my suspicion that it was the fuel pump and maybe saved me the work of replacing the fuel pump when it wasn't the problem. But, the service advisor also told me they recommended replacing the entire steering rack (!). When I asked why, he seriously struggled to come up with an answer, and just said something about it being worn. Really? the quoted rate on the replacement was more than the car was worth, and he didn't even know why they were recommending it.
Now I think I need a stability control reset that as far as I can tell only the dealership can do. I've really been avoiding bringing it in as I know they're going to charge me at least their $170 diagnostic rate and probably write me a quote for over $8k in work again, all for something that apparently takes about 30 seconds if you happen to have a Nissan CONSULT II.
At the same time, I've had no problem asking to go directly into the shop and talking to mechanic while pointing at the part in question.
So I conclude, as everyone says, you got to do your own work as much as possible on an out of warranty European car.
One reason I didn't realize this is because I used to drive a pretty mundane vehicle under warranty, so they never recommended anything grossly unnecessary.
Basically all of those things died with the rise of the internet, because you then have direct access to the manufacturer via their website and could order parts and have them shipped to you. It would also be a lot easier to find a local mechanic if the manufacturers would publish the service documentation for their vehicles on their websites, which they don't do primarily to placate the dealerships who don't want the competition.
It's almost surprising that you can't buy cars on Amazon yet. You can buy cars on eBay, although presumably not direct from the manufacturer as a result of the nonsense dealership laws.
A phrase the older Chinese folks use a lot in my building is "the older generation" or "the younger generation". As in, "the younger generation likes buying things online", or "the older generation prefers making a phone call".
It's made me think more generally about generational differences and how they affect buying patterns, and patterns of doing business generally. I realized, for example, that I really can't stand dealing with contractors (e.g. HVAC) in the older generation who refuse to use Google Calendar or email, and insist on doing everything over the phone, and face-to-face.
I think this "human face of the company" is a good example of a generational difference at play. I categorically do not want to interact with anyone at a dealership. I get product information from word-of-mouth/friends, YouTube, and other sources. Provided a company put some money into creating a customer experience that offered the same level of customization you'd get from a dealership experience (color, trim level, etc) I would be the first person to make a $20-30K purchase online. Not least of which because I'd be confident they'd have built a system not to fuck up my order vs. however it would get input by the person at the dealership who inevitably needs to enter it into the OEM's system to order it.
More and more it feels like I'd rather just rip the humans out and deal more directly with a company's back-office systems (e.g. for placing a car order), than have to play a giant game of telephone explaining something, only to have a human screw it up when entering it. It also annoys me when I call customer service and they remind me 20 times that I should use the website. Of course I should use the goddamned website. I wouldn't be calling customer service if I didn't try that first. This is probably something that won't change until people now in their 20s/30s are in positions to make these decisions in companies, at which time there will be some new trend the "oldsters" don't get. So it goes.
Where would they get the money? From cutting out the middleman, from increasing sales by offering an alternative to the terrible dealership experience (spending 1-2 hours buying a car is not ok) and from gaining the flexibility to offer alternative business models (i.e. subscription models).
Dealerships are the past. They may very well be the deadweight that will cause incumbent OEMs to sink rather than swim.
They would want to cut out the middlemen car dealerships.
The legacy manufacturers could absolutely copy this approach and would love to do so.
Traditional car dealerships need someplace to store all the new and used cars which quickly gets into hundreds of cars sitting around. Showrooms on the other hand can get away with representative samples which requires vastly less space. That means they can afford locations with vastly higher costs per square foot.
This discussion is about American auto dealerships.
Both Ford and GM have substantially lower WACC than Tesla. The figures are public.
It forces companies to have many more local points of contact as they otherwise would, which improves customer service. For example, with my HP laptop, I ordered it and all accessories locally and in my language, can have it serviced within a few days at any of 3 locations in our country, have someone that I can argue with in my language when they inevitably try to claim the warranty was void somehow etc.
If HP had chosen a direct distribution model, I would've had to order it online, send it halfway across the continent for service and have absolutely nobody to talk to in my language to in case of non-standard issues. We saw that exact with Apple some 10 years back, when it was impossible to get an iPhone from our country, because it didn't seem worth it to Apple, while Samsung and everyone else gladly threw phones at our distributors and watched the money pile up.
I bought a Macbook with Applecare. I had a problem with it and brought it to an Apple store. My data was backed up to the cloud so I had no issue surrendering it. I walked out with a brand new-in-box Macbook in less than an hour.
Waiting a few days for it to be serviced seems like it would be a much worse experience...
The point was, that Apple didn't care about our country as there are only 2M or so of us and so we couldn't even get any apple products for many years, while every other manufacturer that used the distributor model was already here.
The point about repairs maybe doesn't apply to Apple (I don't know how they do things around here), but my OnePlus phone, for example, which is sold directly by OnePlus would have to get shipped off to by repaired, possibly at my expense, and I'd have to wait weeks to get it back. Same (to some extent) with anything I buy from Amazon - they're not present in the country so they don't have to abide by the warranty and repair laws as strictly.
The current law creates local dealership monopolies, and the dealerships provide terrible service, and rip everyone off as a result. If you don’t like it, you have to drive dozens of miles to go to a competitor (and car purchases invariably involve multiple trips).
Cities want the sales tax revenue, so they give the dealerships huge tax breaks to attract them.
The whole system should be scrapped.
It's a method of spreading the wealth. The model increases the number of people employed and businesses involved, both directly and indirectly, exponentially.
Moreover, this is exactly the sort of thing where the bad is the enemy of the good. If redistribution is good and cronyism is bad then allowing the cronyist redistribution law to pass not only placates the people who want redistribution (and so they fight less for the better one), it also inflames the good should-be-allies anti-cronyists and requires you to waste political capital on infighting.
Bad compromises are bad. Good law > nothing > bad law.
Another example is most big infrastructure projects in California. You'll notice that most don't finish in time. The real reason is to ensure that there is sustainable construction work going on. They're capable of finishing fast but no one wants that. They just want a large number of people employed. The Trojan Horse is "we're building infrastructure" because otherwise you have to fight the anti-redistribution anti-subsidy people.
That's because when a concession is made to people they rarely will fight to make it perfect in the name of perfect is the enemy of good enough. Anti-cronyists don't expend political effort because they don't have upper-level political support. It's not a thing anyone needs to worry about. Only people who want to get something concrete and people in danger of losing something concrete expend political effort.
So do the same thing with the good solution. Make it a UBI but call it a negative income tax and tell everybody you're giving them a huge tax cut (which for the majority of people you actually are).
> Another example is most big infrastructure projects in California. You'll notice that most don't finish in time. The real reason is to ensure that there is sustainable construction work going on. They're capable of finishing fast but no one wants that. They just want a large number of people employed. The Trojan Horse is "we're building infrastructure" because otherwise you have to fight the anti-redistribution anti-subsidy people.
But that's the same thing. Instead of purposely delaying the construction, just finish it on time and then go back and say "look how inexpensive we can build things now, let's build all the things" and get a hundred more construction projects.
Blowing the budgets every time is how you get them all canceled by giving very inconvenient real evidence to the people who want to cut them out next time.
> Anti-cronyists don't expend political effort. It's not a thing anyone needs to worry about. Only people who want to get something concrete and people in danger of losing something concrete expend political effort.
All the cronyists and taxpayers are also anti-cronyists for everything but their own projects because everything else is competing for resources with them. A state can't pass a budget with a 500,000,000% deficit and expect anybody to buy the bonds, so every piece of garbage in the budget is crowding out the garbage that somebody else wants. The easier you make it to make the case against your thing, the more likely they are to get their garbage to replace yours.
I think this might well be doable. I'm definitely on board with smooth social security over square-wave social security (what we have now).
> But that's the same thing. Instead of purposely delaying the construction, just finish it on time and then go back and say "look how inexpensive we can build things now, let's build all the things" and get a hundred more construction projects.
I'd say the origination costs angle kills this. There is high pressure to keep the tender process high-bureaucracy from all sides, so you can scale single projects into many dollars but you can't start many projects.
That's the status quo. It sucks, therefore find a way to blow it up. Make it so that it doesn't work. Require the contractor to buy cost overrun insurance from an insurance company which obligates the insurance company to pay someone else to finish the entire job if the original contractor exceeds the budget by a penny, then let it be the insurance company's problem to figure out how to make the company come in on budget or contract the job out to someone else who can.
Once you blow up the bad thing (making construction projects exceed their budgets), the path of least resistance to more construction jobs becomes the good thing (many more construction projects that meet their budgets). But you have to blow up the bad thing first or it remains the status quo.
We know the methods exist because we've used some of them before: https://www.tradelineinc.com/reports/2007-10/unprecedented-t...
What we don't have is a political method to ensure the per-project technical incentives are correct.
* Information Asymmetries: I don't know anything about you or any other org working to combat this so I'm not comfortable spending money on you.
* Coordination Problems: Where do we act, on what scale, etc.
* Value Assignation Problems: How do I benefit from this for the effort I need to put in?
* Risk Problems: What is the chance of success solving a problem of this scale?
Essentially, I'm only seeking to explain. Personally, I have no problem with the system existing as it does. I would prefer other systems out of an inner desire for elegance. But I'm pretty proficient in acting within these to my own benefit so I won't tear it down. Perhaps part of the problem is getting folks like me to care to change this. I'm happy to cheer you on, though. Good luck!
Instead of a sales tax, let that person spend that money on other products and services. And to raise revenue, use a progressive tax such as income.
I seem to remember tax based on the purchase location when I bought a car a few years ago in California.
>There’s no advantage, in terms of sales tax, on where you go to buy a car. An Orange County resident who buys a car in Santa Monica will stay pay the Orange County sales tax rate. The sales tax rate is charged based on where the car will be registered.
I suspect that the Car and Driver article was poorly researched and factually incorrect.
[1] https://www.latimes.com/local/california/la-me-aa2-snapshot-...
Seems to me that if the process cannot be streamlined by an app, that the process is wrong. Growing pains for this industry, I get it. But it shouldn't really be any harder than what an 'app' can provide. Give me a few model options, click 'Buy'.
Just as high touch enterprise sales is here to stay, so is a human in the loop for auto purchases. You are not the average consumer if you’re here. Your average consumer will not tolerate rough edges of an app when spending $37k.
But that's the process problem. If you go to the website and click "buy" and the car shows up in perfect condition exactly to your specifications then there is nothing to need a human to interact with. And if they can get it to the point where that's what happens 99.99% of the time, having to send out a human representative the other 0.01% of the time is cost effective.
However, as bad as that experience was, it was faaaaaaaar better than any dealership interaction I've every had. I would never go back, even though I disliked the Tesla experience.
Even if Tesla wasn't an electric car, I'd be tempted to use them just to avoid the dealership experience.
It means a new concentrated powerful special interest in their local area can outbid them, in their diffuse helplessness, in influencing politics.
If another electric vehicle player tried to get in the game today, I'm sure Tesla join the lobby against them using the same argument.
No. It wasn't regulatory capture. It was about competition.
The same thing happened in the United States with movie theaters, television production, alcohol distribution, etc...
There's a reason that bars aren't owned by breweries anymore. There's a reason that movie theaters aren't owned by the production companies anymore.
"Reglatory capture" is a fun HN buzzword, but if you study history, you know why things are done.
It was an antitrust lawsuit by the government in 1938 that brought this about, not legislation.
I think it's pretty unfair to be "sure" of this. Can you name other instances where Tesla has played regulatory capture games?