7 ms·

> Dealerships are going to have to sell electric cars or stop being in the car dealership business Interesting you should say that. Virtually all dealerships

by grecy 8y ago

> Dealerships are going to have to sell electric cars or stop being in the car dealership business Interesting you should say that. Virtually all dealerships actually run at a loss "selling cars" (front of house), and turn a profit from "fixing cars" (back of house). Going back to your quote, there is no such thing as a profitable "Dealership business". There is only a profitable "fixing" business. I believe your prediction is correct, they will stop being in business.

jjeaff 8y ago
They definitely won't go out of business. They have a legal monopoly on selling cars. They will have to increase their front of house margins though. And since all dealerships will be in the same boat, they will all have to increase their markup so it won't be a problem for them. Either that or they will find new ways to hide the true costs of the vehicles. You'll probably see a lot more leases. Complicated leases are a great way to squeeze extra money out of people.
- btilly 8y ago
  The legal monopoly is weaker than it used to be. See https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes for some information about the battled that Tesla already fought on this issue. That said, it is a lot easier for Tesla to sell direct than an established manufacturer with a network of dealerships to placate.
  - clouddrover 8y ago
    Hyundai is (or will be soon, depending on where you live) selling the Hyundai Kona Electric and the Kia Niro EV. Both have the same powertrain, have good range, and are price competitive with other electric cars ($36,450 USD before incentives for the Kona): https://www.hyundaiusa.com/kona-electric/index.aspx https://www.hyundaiusa.com/kona-electric/index.aspx https://www.kia.com/us/en/content/vehicles/upcoming-vehicles/2019-niro-ev https://www.kia.com/us/en/content/vehicles/upcoming-vehicles... How can Hyundai do that if the dealerships are a problem?
    - btilly 8y ago
      Hyundai can ship all the cars that it wants to the dealerships. But the sales people will steer people towards the cars that they want to sell. And can choose how hard to negotiate if you insist on getting the electric car that you see.
      - ams6110 8y ago
        Sales people want sales, for the least investment of their time. If you come in wanting to buy an EV, that's what they are going to sell you. If you come in wanting "a car," sure they will try to steer you to whatever is currently the most profitable one for them. In my experience, the car they try to sell you is the one you are looking at.
        btilly 8y ago
        Your experience may be what it may be. But in my experience, they steer you towards the most profitable for them car that they think you'll buy. https://www.digitaltrends.com/cool-tech/dealerships-dismiss-electric-vehicles/ https://www.digitaltrends.com/cool-tech/dealerships-dismiss-... provides evidence that I am right - and that in practice dealerships really do steer customers away from electric vehicles.
        clouddrover 8y ago
        The article is focused on Scandinavian countries. Norway has one of the highest rates of electric car ownership in the world (all-electric and plug-in hybrid): https://www.theguardian.com/environment/2017/dec/25/norway-leads-way-electric-cars-green-taxation-shift https://www.theguardian.com/environment/2017/dec/25/norway-l... https://en.wikipedia.org/wiki/Plug-in_electric_vehicles_in_Norway https://en.wikipedia.org/wiki/Plug-in_electric_vehicles_in_N... If anything, the Digital Trends article serves to demonstrate how ineffective the dealerships are in persuading people away from electric cars. Other factors matter more.
        8y ago
- prostoalex 8y ago
  Not that Saturn is a great example, but I remember there being a prominent brand from an established manufacturer that sold more or less direct (or at least had a published non-negotiable price and was sold at a brand-dedicated sales center). How did GM get around dealership monopolies?
  - ams6110 8y ago
    The Saturn line had dealerships.
fludlight 8y ago
I have seen the financial statements of dozens of dealerships and they absolutely turn a tidy profit. What you call the "front office" only loses money during recessions and when WTI is above a hundred. The effect of the latter varies wildly based on product mix. Also, the service dept is not sufficient to save a struggling dealership during a bad economy. The main drivers of dealership economics are sales revenue relative to local and national peers and cost/availability of wholesale/retail financing. Not a top dealer for your market? You're screwed. Regional recession? Screwed. Lender pulled your flooring? Screwed. It's suddenly illegal to charge usurious interest rates (and fees!) for $4k used cars? Joe Schmo can't get cheap financing for a $40k brodozer? You get it.

by grecy 8y ago

jjeaff 8y ago

They definitely won't go out of business. They have a legal monopoly on selling cars. They will have to increase their front of house margins though. And since all dealerships will be in the same boat, they will all have to increase their markup so it won't be a problem for them. Either that or they will find new ways to hide the true costs of the vehicles. You'll probably see a lot more leases. Complicated leases are a great way to squeeze extra money out of people.

btilly 8y ago
The legal monopoly is weaker than it used to be. See https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes for some information about the battled that Tesla already fought on this issue. That said, it is a lot easier for Tesla to sell direct than an established manufacturer with a network of dealerships to placate.
- clouddrover 8y ago
  Hyundai is (or will be soon, depending on where you live) selling the Hyundai Kona Electric and the Kia Niro EV. Both have the same powertrain, have good range, and are price competitive with other electric cars ($36,450 USD before incentives for the Kona): https://www.hyundaiusa.com/kona-electric/index.aspx https://www.hyundaiusa.com/kona-electric/index.aspx https://www.kia.com/us/en/content/vehicles/upcoming-vehicles/2019-niro-ev https://www.kia.com/us/en/content/vehicles/upcoming-vehicles... How can Hyundai do that if the dealerships are a problem?
  - btilly 8y ago
    Hyundai can ship all the cars that it wants to the dealerships. But the sales people will steer people towards the cars that they want to sell. And can choose how hard to negotiate if you insist on getting the electric car that you see.
    - ams6110 8y ago
      Sales people want sales, for the least investment of their time. If you come in wanting to buy an EV, that's what they are going to sell you. If you come in wanting "a car," sure they will try to steer you to whatever is currently the most profitable one for them. In my experience, the car they try to sell you is the one you are looking at.
      - btilly 8y ago
        Your experience may be what it may be. But in my experience, they steer you towards the most profitable for them car that they think you'll buy. https://www.digitaltrends.com/cool-tech/dealerships-dismiss-electric-vehicles/ https://www.digitaltrends.com/cool-tech/dealerships-dismiss-... provides evidence that I am right - and that in practice dealerships really do steer customers away from electric vehicles.
        clouddrover 8y ago
        The article is focused on Scandinavian countries. Norway has one of the highest rates of electric car ownership in the world (all-electric and plug-in hybrid): https://www.theguardian.com/environment/2017/dec/25/norway-leads-way-electric-cars-green-taxation-shift https://www.theguardian.com/environment/2017/dec/25/norway-l... https://en.wikipedia.org/wiki/Plug-in_electric_vehicles_in_Norway https://en.wikipedia.org/wiki/Plug-in_electric_vehicles_in_N... If anything, the Digital Trends article serves to demonstrate how ineffective the dealerships are in persuading people away from electric cars. Other factors matter more.
        8y ago
prostoalex 8y ago
Not that Saturn is a great example, but I remember there being a prominent brand from an established manufacturer that sold more or less direct (or at least had a published non-negotiable price and was sold at a brand-dedicated sales center). How did GM get around dealership monopolies?
- ams6110 8y ago
  The Saturn line had dealerships.

fludlight 8y ago

I have seen the financial statements of dozens of dealerships and they absolutely turn a tidy profit. What you call the "front office" only loses money during recessions and when WTI is above a hundred. The effect of the latter varies wildly based on product mix. Also, the service dept is not sufficient to save a struggling dealership during a bad economy. The main drivers of dealership economics are sales revenue relative to local and national peers and cost/availability of wholesale/retail financing. Not a top dealer for your market? You're screwed. Regional recession? Screwed. Lender pulled your flooring? Screwed. It's suddenly illegal to charge usurious interest rates (and fees!) for $4k used cars? Joe Schmo can't get cheap financing for a $40k brodozer? You get it.