5 ms·

>First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. This is essentially the case on all volume mainstream

by MrFoof 11y ago

>First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. This is essentially the case on all volume mainstream manufacturers. Hyundai/Kia, Toyota/Scion, Honda, Nissan, Mazda, Ford, Chevrolet, Dodge/Chrysler all fall in this bucket in the United States. The exception to this being trucks (RAM, GMC and Chevy Silverado, Ford F-Series). Where money is actually made on sales are in the luxury segment. However, who is really making the good money has become interesting over the years. Lexus, Acura, and Cadillac margins are fine, but the Europeans have better margins still, though there's still a chasm between everyone and the VW Group. Rolls-Royce aside, BMW only has Mini which has been little more than break-even since its relaunch. Moreover, there are slimmer margins on the 1/2-series since they serve as conquest cars. The same goes for Mercedes-Benz with SMART, and the CLA/GLA being their (very aggressively positioned) conquest vehicles. For mainstream luxury brands, Audi has some of the highest gross margins at 10%. Yet their ultra-luxury brands -- Bentley, Lamborghini, and most importantly Porsche -- is where the real money is made (at least on a per-unit basis). I struggle to think of the last time (since their return to form 10-15 years ago) where Porsche's gross margins were under 20%. Porsche prints money. Sorry for not taking JLR into account, as they're still restructuring. Infiniti is excluded because Ghosn has nearly killed the brand twice. As for Tesla, I've been saying for years that they were more likely to model themselves more after Porsche than Honda/Toyota, as that's where the real money is for a still growing company. When the Model X pricing was announced, that was all but confirmed.

venning 11y ago
From everything I've read about the industry for the last 15 years, this is all completely correct and serves to demonstrate why it's such a hard industry. Extremely high costs, low profit margins, fiendish competition, considerable regulation, and absolutely no guarantee that the new product you just invested billions in won't flop after you've done all the work.
- grandalf 11y ago
  True, but there are some low hanging fruit that have not been attempted yet... in the following areas: Finance: - why can't I rent a car for a month and if I like it sign up for a year or two or three? If I want to own it, why can't I just convert to a purchase? These options are not fluid and interchangeable which necessitates much more of a "sale" rather than a more flexible, value oriented approach. A manufacturer should always be willing to convert a purchased vehicle into a lease or rental again. Inventory/Planning: - trim levels are out of control and make inventory planning much worse. If the base model sells for $18K but is available in a $36K trim level, is it really the same car? Why not just keep it simple. Nobody wants the salesperson to exert pressure to make me buy some "touring package" that I don't care about just because that is what is on the lot. Pricing/Selling: Buying a car takes hours while you wait for the salesperson to try to sucker you into paying full MSRP and he/she pretends to be negotiating on your behalf with the manager, who writes with a marker on the sheet of paper the best price. This horrible practice is highly unpleasant for all involved. The dealer lobby prefers negotiated pricing over fixed price because it suckers poorly informed consumers (many of whom are elderly) into overpaying. I'd like to walk into a dealership pre-approved for a loan and pick from among 3 or 4 exterior colors and be done with it in 10-20 minutes. Better yet I'd like to just order it online and have it delivered in a few weeks, or better yet (per the above suggestion) just rent it for a month on an impulse. All this is probably a distraction though, since self-driving car tech will allow us to get by with a fraction of the number of cars on the road and likely few of us will choose to own a car in the traditional sense.
  - venning 11y ago
    > why can't I rent a car for a month and if I like it sign up for a year or two or three? You can, but if you don't buy it they now have a radically-devalued product they still need to sell. Some dealers experiment with this. Many of my customers had problems with buying a car with 100 miles on it "new". I can't remember the exact regulation, but at a certain mileage a car is no longer legally new. > trim levels are out of control and make inventory planning much worse. Absolutely. Honda attempts to address this (in the US market) by having very few trim levels and (when I was selling) no options. > Buying a car takes hours while you wait for the salesperson to try to sucker you... Yes. It's a terrible practice. One that is getting slightly better with internet shoppers who get the price negotiated before they step into the dealership. Most of my old-school managers felt that, within a few decades, negotiating over prices would end.
deleted 11y ago
[deleted]

by MrFoof 11y ago

venning 11y ago

From everything I've read about the industry for the last 15 years, this is all completely correct and serves to demonstrate why it's such a hard industry. Extremely high costs, low profit margins, fiendish competition, considerable regulation, and absolutely no guarantee that the new product you just invested billions in won't flop after you've done all the work.

grandalf 11y ago
True, but there are some low hanging fruit that have not been attempted yet... in the following areas: Finance: - why can't I rent a car for a month and if I like it sign up for a year or two or three? If I want to own it, why can't I just convert to a purchase? These options are not fluid and interchangeable which necessitates much more of a "sale" rather than a more flexible, value oriented approach. A manufacturer should always be willing to convert a purchased vehicle into a lease or rental again. Inventory/Planning: - trim levels are out of control and make inventory planning much worse. If the base model sells for $18K but is available in a $36K trim level, is it really the same car? Why not just keep it simple. Nobody wants the salesperson to exert pressure to make me buy some "touring package" that I don't care about just because that is what is on the lot. Pricing/Selling: Buying a car takes hours while you wait for the salesperson to try to sucker you into paying full MSRP and he/she pretends to be negotiating on your behalf with the manager, who writes with a marker on the sheet of paper the best price. This horrible practice is highly unpleasant for all involved. The dealer lobby prefers negotiated pricing over fixed price because it suckers poorly informed consumers (many of whom are elderly) into overpaying. I'd like to walk into a dealership pre-approved for a loan and pick from among 3 or 4 exterior colors and be done with it in 10-20 minutes. Better yet I'd like to just order it online and have it delivered in a few weeks, or better yet (per the above suggestion) just rent it for a month on an impulse. All this is probably a distraction though, since self-driving car tech will allow us to get by with a fraction of the number of cars on the road and likely few of us will choose to own a car in the traditional sense.
- venning 11y ago
  > why can't I rent a car for a month and if I like it sign up for a year or two or three? You can, but if you don't buy it they now have a radically-devalued product they still need to sell. Some dealers experiment with this. Many of my customers had problems with buying a car with 100 miles on it "new". I can't remember the exact regulation, but at a certain mileage a car is no longer legally new. > trim levels are out of control and make inventory planning much worse. Absolutely. Honda attempts to address this (in the US market) by having very few trim levels and (when I was selling) no options. > Buying a car takes hours while you wait for the salesperson to try to sucker you... Yes. It's a terrible practice. One that is getting slightly better with internet shoppers who get the price negotiated before they step into the dealership. Most of my old-school managers felt that, within a few decades, negotiating over prices would end.

deleted 11y ago

[deleted]