DealerRefresh Top100

[Ryan Everson]

I bet a lot of the OEMs are eyeing Tesla and seeing some brilliant profit light bulbs go off.
RId yourself of franchised dealers and control the vertical to the buyer's parking space.

If I am thinking this, wouldn't the OEMs be thinking this, too?

A lot of OEM's did think this.

Only recently, have they been reminded that it isn't so easy and dealers play a vital and necessary role.

Tesla is the exception, not the rule. And even Tesla is beginning to adopt many of the same practices - dealership "delivery centers", monthly incentives, discounts on excess inventory, etc.

 

[BillKVMotorCo]

Buying a car is an emotional decision. If it weren't, there would only be one kind of car. Everybody needs a pat on the butt to say they're doing the right thing. And over 80% of people will switch to a different car at the time of purchase.

People will always buy cars from other people. This is why so few go through the full digital retailing tunnel.

I do agree that dealers prefer to negotiate more so than customers. But customers are on guard because they're so concerned about being ripped off.

1,000%. As I tell our people, our job is to "lower the wall."

 

[Carsten]

A lot of OEM's did think this.

Only recently, have they been reminded that it isn't so easy and dealers play a vital and necessary role.

Tesla is the exception, not the rule. And even Tesla is beginning to adopt many of the same practices - dealership "delivery centers", monthly incentives, discounts on excess inventory, etc.

i wonder how much of this symbiotic connection is out of legal necessity or is it because it is cheaper still not to follow Tesla?

Isn't there some law that mandates OEMs use Dealerships? I remember reading an article about this a few years ago when Tesla became a thing for real.

 

[JDHigginbotham]

i wonder how much of this symbiotic connection is out of legal necessity or is it because it is cheaper still not to follow Tesla?

Isn't there some law that mandates OEMs use Dealerships? I remember reading an article about this a few years ago when Tesla became a thing for real.

I think this take is becoming dated. Laws or not, dealers are necessary. Tesla should be less of a model to follow as more EVs are actually driven and need service, trade-in, etc.

EV or not, the DTC model hasn't closed the loop on full lifecycle.

Sure, the concept of buying a car on amazon is sexy...but then what?

Things break, markets shift. Dealers have the agility and willingness to serve.

 

[Carsten]

You might be misunderstanding me.

Dealerships need to exist. Carvana (Amazon) didn't work - or it is still a wait an see style of system which depends largely on the acceptance of EV vehicles,

If I remember correctly form the article, the laws created by each state were to create the current 3rd party owner dealership system that exists today. Tesla fought against that to fully own their dealerships and thus putting the consumer in the possible sights of unfair production and distribution practices.

Thus, I believe that it is very possible that more and more manufacturers will create their own dealership networks. While the 3rd party ones will either sell out to the manufacturer or shift more and more into a used car dealer style of service provide. IF they are still willing to serve at lower and tighter profit margins.

 

[Ryan Everson]

i wonder how much of this symbiotic connection is out of legal necessity or is it because it is cheaper still not to follow Tesla?

Isn't there some law that mandates OEMs use Dealerships? I remember reading an article about this a few years ago when Tesla became a thing for real.

Yes, there are dealer franchise laws in virtually every state that prevent direct manufacturer auto sales.

Even EV manufacturers that initially modeled their business after Tesla, have come to the realization of the inherit advantages of having a dealer franchise network - look at VinFast and Fisker as two of the most recent examples.

OEMs sell dealers cars as soon as they're built - prices are set and non-negotiable. This allows OEM's to get inventory off their books immediately, something Tesla does not have the luxury of.

Meanwhile dealers pay for millions of dollars of inventory and have to pay ever increasing carrying costs on their floorplan interest. Ask a dealer what their average floorplan expense was last month compared to 18 months ago. You'll be astonished.

More inventory + higher priced models + slowing sales + high fed rates = $$$$$.

 

[Ryan Everson]

You might be misunderstanding me.

Dealerships need to exist. Carvana (Amazon) didn't work - or it is still a wait an see style of system which depends largely on the acceptance of EV vehicles,

If I remember correctly form the article, the laws created by each state were to create the current 3rd party owner dealership system that exists today. Tesla fought against that to fully own their dealerships and thus putting the consumer in the possible sights of unfair production and distribution practices.

Thus, I believe that it is very possible that more and more manufacturers will create their own dealership networks. While the 3rd party ones will either sell out to the manufacturer or shift more and more into a used car dealer style of service provide. IF they are still willing to serve at lower and tighter profit margins.

For all intents and purposes, manufacturers already have their own dealership network.

I would encourage you to spend 6 months working at a dealership and you will quickly realize all of the arduous brand standards, guidelines, and processes that manufacturers require dealers to follow (or face severe financial penalties).

Not only how we have to price and advertise vehicles, but also down to the exact floor tile and toilets in bathrooms (yes, seriously) and which snack brands we can have in our customer lounge. It's insane.

So I'm not quite sure what would change for the better with OEM-owned stores. Being less philanthropic? Being less profitable? Not having a connection to the local community? Being rigid in policies and not having a goodwill policy account to empower staff to resolve customer service issues?

 

[JDHigginbotham]

If I remember correctly form the article, the laws created by each state were to create the current 3rd party owner dealership system that exists today. Tesla fought against that to fully own their dealerships and thus putting the consumer in the possible sights of unfair production and distribution practices.

I remember visiting my first Tesla dealership in Salt Lake City. It was drama in local headlines. It was also an awkward place. Imagine the retail space in the mall you're used to...but now on a lot. It wasn't really a dealership. Closer to some kids selling iPhones.

Thus, I believe that it is very possible that more and more manufacturers will create their own dealership networks. While the 3rd party ones will either sell out to the manufacturer or shift more and more into a used car dealer style of service provide. IF they are still willing to serve at lower and tighter profit margins.

CEO of CDK, Brian McDonald, had some interesting thoughts on this as well.

CDG: CDK Interview

1. OEMs are good at a lot of things, but running profitable dealerships isn't one of them
2. The capital involved in acquiring a notable amount of their network doesn't pencil

 

[Ryan Everson]

I believe that it is very possible that more and more manufacturers will create their own dealership networks. While the 3rd party ones will either sell out to the manufacturer or shift more and more into a used car dealer style of service provide. IF they are still willing to serve at lower and tighter profit margins.

Carsten, I believe you are a vendor starting a company that will sell services to dealers. That is a challenging endeavor, however franchise dealers are willing to give vendors a chance to prove themselves and sign up for a few months. OEM's would never do that.

I would also caution that dealers will quickly sniff out vendors who they may perceive as having an anti-dealer mentality, why would they want to partner with someone that they feel is rooting against them? Not saying you are, but just something to be cognizant of.

Over the years, dealers have seen hundreds, if not thousands, of vendors enter the automotive retail space with a technology background and venture capital $ looking to disrupt how business is done. The vast majority fail. The ones that succeed are the ones that bring in talent with dealership experience.

It has to be a blend of technology + automotive retail experience. Tekion is a great example. Their CEO, Jay Vijayan, came from Tesla. He has created an absolute innovative disruptor in automotive retail, but they are adapting their business to fit dealerships' needs. He even bought 2 stores of his own to learn first hand. This is the formula for success.

 

[joe.pistell]

Even EV manufacturers that initially modeled their business after Tesla, have come to the realization of the inherit advantages of having a dealer franchise network - look at VinFast and Fisker as two of the most recent examples.

Lately, I am hearing of Tesla rooftops being added.

Current Counts:

• Stores & Galleries: 109 locations
• Service Centers: 142 locations

https://www.tesla.com/findus/list/stores/United+States