4 ms·

Yep, buying a car sucks. But this is one of the largest supply-chain operations in the world. The dealer franchise system and its legal framework have evolved

Yep, buying a car sucks. But this is one of the largest supply-chain operations in the world. The dealer franchise system and its legal framework have evolved over 100 years and are balanced pretty delicately. It can't just be refactored by waving a regulatory wand at it and hoping for the best. Cars will still have to be warehoused, delivered, serviced, and resold. Somebody has to buy your old junky trade-in. Somebody has to run the showroom, if you want to actually like see the car before you buy it. So we're going to do a regulatory taking of the franchise, worth millions of dollars per dealership, and then have the manufacturer open a showroom and warehousing lot and service center in every town and city that has a dealership? Or just open a direct sales channel to compete with dealers, but make the existing dealers perform service and deliver inventory? And take your trade-in? Manufacturers hate dealers. It's mutual. The only reason consumers don't hate the manufacturers so much is that they have never had to deal with them directly. Dealer protection laws are there because manufacturers have a long history of trying to steal from dealers, cheat them, and put them out of business at whim. Those are the manufacturers that consumers are asking to deal with directly. I'm sure they'll treat consumers better than they treat their business partners!

rlpb 11y ago
> Dealer protection laws are there because manufacturers have a long history of trying to steal from dealers, cheat them, and put them out of business at whim. That doesn't justify them. I thought the US is supposed to be anti-regulatory? Why didn't dealers handle this by becoming primarily multiple-manufacturer and thus able to switch to or favor a different manufacturer at whim?
- bgribble 11y ago
  That was the normal case in most of the US until pretty recently. Now manufacturers don't want competing brands in the same building. They want a uniform branded buying experience. So they make it very hard to transfer franchises if the new franchisee sells other makes at the same location. The manufacturer has refusal on the sale of the franchise, which is most of the dealership's value.
- adventured 11y ago
  The US is quite regulated overall and is anything but anti-regulation at this point. It has more laws governing its economy than any other nation, and adds thousands to that tally annually. It's not an exaggeration to say that nobody can keep up with it all, and that's before getting to the insane tax code. It hasn't been a classic free market of very low regulation, in nearly a century. George McGovern - politician turned entrepreneur - wrote one of my favorite articles on the subject in 1992: http://www.wsj.com/articles/SB10001424052970203406404578070543545022704 http://www.wsj.com/articles/SB100014240529702034064045780705...
- jameshart 11y ago
  Right. The historical reasons for these laws seems to be because the US is actually 50 competing state economies, and 49 of those states do not contain Detroit. Dealer protection laws are state protectionism. The fact that states outside California did not go to war to save their local Best Buys when Apple started selling direct, or states other than Washington go to bat for their local Borders bookstores when Amazon appeared (though there has been some rejigging of state sales tax laws around that) suggests that if the same situation were to occur today, in a less regulatory minded era than the early 20th century, states might be less concerned about trying to prevent Michigan car companies from driving their local dealers out of business.
TeMPOraL 11y ago
Yeah. People think that because it works with Tesla, it will work with everyone, but they miss the point that Tesla is a pretty unique company - both because they're new to the market, and because under Elon's leadership, they have making the best possible car and electrification of world transport as a terminal goal, not as instrumental to simply getting more money. Other companies won't play nicely like this, because they don't have a mission to achieve.
- baddox 11y ago
  What does being new to the market or having a supposedly noble goal have anything to do with selling cars directly to customers?
  - TeMPOraL 11y ago
    The reason there are laws protecting dealerships is that manufacturers were screwing everyone over as much as they could. Tesla can be trusted to deal with customers directly without screwing them over, because of the reasons I mentioned. Other companies don't have them, and can not be trusted. Therefore you can't assume that just because it works with Tesla, it will work with the rest of the industry.
    - coldtea 11y ago
      "It works with Tesla because people trust Tesla because they are in it for making the perfect car"? I don't think that reasoning explains the situation. Their cars aren't even that good, especially earlier production models and their several problems: https://en.wikipedia.org/wiki/Tesla_Motors#Product_issues https://en.wikipedia.org/wiki/Tesla_Motors#Product_issues
    - prostoalex 11y ago
      > manufacturers were screwing everyone over as much as they could Not to doubt car dealers' reputation for honesty and integrity, but what's a good resource to read up on offenses the manufacturers have committed?
- 11y ago
SixSigma 11y ago
Indeed. Let's not forget why direct sales are illegal - they used to be exclusive. It was even harder than in the OP because you walked from manufacturer to manufacturer. Not that I don't think it is time for an overhaul or other models but ignoring history would be churlish. You pay for the inventory costs of spoilage in other industries!
baddox 11y ago
I don't quite understand what you're predicting would happen if all dealer protection laws were removed. Car manufacturers would drive dealerships out of business, and...then what? Be happy not selling cars? I suspect they would still want to sell cars, and that's going to need some local presence.
eru 11y ago
> It can't just be refactored by waving a regulatory wand at it and hoping for the best. No need for anything new, just find the sanest country, and copy their laws.
- dagw 11y ago
  Laws are a product of culture. Copying a countries laws, without also copying its culture won't give you the effects you are hoping for.
  - tim333 11y ago
    Copying sane laws may not be perfect but it's not a bad way to go.
    - eru 11y ago
      It happens in practice all the time. Not only between countries, but also between states in the various federal systems around the world. (And that's one of the arguments in favour of federal systems.)
eloisant 11y ago
In France there is almost no "inventory" of new cars in car dealership. You try the model they have, but then you can configure it exactly how you want and it gets custom built for you before being shipped to the dealership. Why can't you do that in US?
- sgustard 11y ago
  You can; custom ordering is always an option. Most people don't like to wait, or fear they lose price leverage. Which is to say there's often a chance to save by taking a car off the lot at the end of the month.
  - brigade 11y ago
    Plenty of dealerships don't let you custom order, period. Good luck finding a Honda/Acura dealership that does, for example. And when you can, you do lose any negotiation leverage you had and will pay at least MSRP for the privilege.
beeboop 11y ago
This is a terrible argument in support of franchise dealerships. If people care so much about being treated poorly by the manufacturer then they can go to a private dealership and pay thousands in markup to have someone smile at them through gritted teeth. The idea that tension between manufacturers and the shitholes that are dealerships will somehow translate into tension between the manufacturer and buyers is ridiculous. Why would the $15/hour salesman be affected by this at all? He wouldn't be.
mikeash 11y ago
> Or just open a direct sales channel to compete with dealers, but make the existing dealers perform service and deliver inventory? And take your trade-in? I don't really understand this. You won't have to make them perform service. Dealers love performing service. It's where they make their money. The car sales side mostly exists to drive business to the service side. Deliver inventory? If they can do it better than the manufacturer, sure. If they can't, then why should that side exist? Whoever can do the best job should be the ones doing it. Take your trade-in? Most places just sell your trade at auction, and make a profit on it. I don't see why they would stop this, or be unwilling to do it. Either independent dealers provide value, or they don't. If they provide value, they should be able to survive in an environment where manufacturers are allowed to sell directly to customers. If they don't, then why are we keeping them around?
nradov 11y ago
CarMax will buy your old junky trade-in for cash today. So we already have somebody filling that role. http://www.carmax.com/enus/we-buy-cars/default.html http://www.carmax.com/enus/we-buy-cars/default.html

rlpb 11y ago

> Dealer protection laws are there because manufacturers have a long history of trying to steal from dealers, cheat them, and put them out of business at whim. That doesn't justify them. I thought the US is supposed to be anti-regulatory? Why didn't dealers handle this by becoming primarily multiple-manufacturer and thus able to switch to or favor a different manufacturer at whim?

bgribble 11y ago
That was the normal case in most of the US until pretty recently. Now manufacturers don't want competing brands in the same building. They want a uniform branded buying experience. So they make it very hard to transfer franchises if the new franchisee sells other makes at the same location. The manufacturer has refusal on the sale of the franchise, which is most of the dealership's value.
adventured 11y ago
The US is quite regulated overall and is anything but anti-regulation at this point. It has more laws governing its economy than any other nation, and adds thousands to that tally annually. It's not an exaggeration to say that nobody can keep up with it all, and that's before getting to the insane tax code. It hasn't been a classic free market of very low regulation, in nearly a century. George McGovern - politician turned entrepreneur - wrote one of my favorite articles on the subject in 1992: http://www.wsj.com/articles/SB10001424052970203406404578070543545022704 http://www.wsj.com/articles/SB100014240529702034064045780705...
jameshart 11y ago
Right. The historical reasons for these laws seems to be because the US is actually 50 competing state economies, and 49 of those states do not contain Detroit. Dealer protection laws are state protectionism. The fact that states outside California did not go to war to save their local Best Buys when Apple started selling direct, or states other than Washington go to bat for their local Borders bookstores when Amazon appeared (though there has been some rejigging of state sales tax laws around that) suggests that if the same situation were to occur today, in a less regulatory minded era than the early 20th century, states might be less concerned about trying to prevent Michigan car companies from driving their local dealers out of business.

TeMPOraL 11y ago

Yeah. People think that because it works with Tesla, it will work with everyone, but they miss the point that Tesla is a pretty unique company - both because they're new to the market, and because under Elon's leadership, they have making the best possible car and electrification of world transport as a terminal goal, not as instrumental to simply getting more money. Other companies won't play nicely like this, because they don't have a mission to achieve.

baddox 11y ago
What does being new to the market or having a supposedly noble goal have anything to do with selling cars directly to customers?
- TeMPOraL 11y ago
  The reason there are laws protecting dealerships is that manufacturers were screwing everyone over as much as they could. Tesla can be trusted to deal with customers directly without screwing them over, because of the reasons I mentioned. Other companies don't have them, and can not be trusted. Therefore you can't assume that just because it works with Tesla, it will work with the rest of the industry.
  - coldtea 11y ago
    "It works with Tesla because people trust Tesla because they are in it for making the perfect car"? I don't think that reasoning explains the situation. Their cars aren't even that good, especially earlier production models and their several problems: https://en.wikipedia.org/wiki/Tesla_Motors#Product_issues https://en.wikipedia.org/wiki/Tesla_Motors#Product_issues
  - prostoalex 11y ago
    > manufacturers were screwing everyone over as much as they could Not to doubt car dealers' reputation for honesty and integrity, but what's a good resource to read up on offenses the manufacturers have committed?
11y ago

SixSigma 11y ago

Indeed. Let's not forget why direct sales are illegal - they used to be exclusive. It was even harder than in the OP because you walked from manufacturer to manufacturer. Not that I don't think it is time for an overhaul or other models but ignoring history would be churlish. You pay for the inventory costs of spoilage in other industries!

baddox 11y ago

I don't quite understand what you're predicting would happen if all dealer protection laws were removed. Car manufacturers would drive dealerships out of business, and...then what? Be happy not selling cars? I suspect they would still want to sell cars, and that's going to need some local presence.

eru 11y ago

> It can't just be refactored by waving a regulatory wand at it and hoping for the best. No need for anything new, just find the sanest country, and copy their laws.

dagw 11y ago
Laws are a product of culture. Copying a countries laws, without also copying its culture won't give you the effects you are hoping for.
- tim333 11y ago
  Copying sane laws may not be perfect but it's not a bad way to go.
  - eru 11y ago
    It happens in practice all the time. Not only between countries, but also between states in the various federal systems around the world. (And that's one of the arguments in favour of federal systems.)

eloisant 11y ago

In France there is almost no "inventory" of new cars in car dealership. You try the model they have, but then you can configure it exactly how you want and it gets custom built for you before being shipped to the dealership. Why can't you do that in US?

sgustard 11y ago
You can; custom ordering is always an option. Most people don't like to wait, or fear they lose price leverage. Which is to say there's often a chance to save by taking a car off the lot at the end of the month.
- brigade 11y ago
  Plenty of dealerships don't let you custom order, period. Good luck finding a Honda/Acura dealership that does, for example. And when you can, you do lose any negotiation leverage you had and will pay at least MSRP for the privilege.

beeboop 11y ago

This is a terrible argument in support of franchise dealerships. If people care so much about being treated poorly by the manufacturer then they can go to a private dealership and pay thousands in markup to have someone smile at them through gritted teeth. The idea that tension between manufacturers and the shitholes that are dealerships will somehow translate into tension between the manufacturer and buyers is ridiculous. Why would the $15/hour salesman be affected by this at all? He wouldn't be.

mikeash 11y ago

> Or just open a direct sales channel to compete with dealers, but make the existing dealers perform service and deliver inventory? And take your trade-in? I don't really understand this. You won't have to make them perform service. Dealers love performing service. It's where they make their money. The car sales side mostly exists to drive business to the service side. Deliver inventory? If they can do it better than the manufacturer, sure. If they can't, then why should that side exist? Whoever can do the best job should be the ones doing it. Take your trade-in? Most places just sell your trade at auction, and make a profit on it. I don't see why they would stop this, or be unwilling to do it. Either independent dealers provide value, or they don't. If they provide value, they should be able to survive in an environment where manufacturers are allowed to sell directly to customers. If they don't, then why are we keeping them around?

nradov 11y ago

CarMax will buy your old junky trade-in for cash today. So we already have somebody filling that role. http://www.carmax.com/enus/we-buy-cars/default.html http://www.carmax.com/enus/we-buy-cars/default.html