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The probability is not 100%, but I believe it to be very high. As for your hypothetical, the reason is that the dealers that try to do that won't make a suffic

by btilly 8y ago

The probability is not 100%, but I believe it to be very high. As for your hypothetical, the reason is that the dealers that try to do that won't make a sufficient profit to their business model unless they sell EVs at a very significant premium to published list price. And it will be very hard to sell consumers on letting them do that. Even if you could get consumers to accept those prices, the industry would then face the problem that the margins on EVs from traditional car manufacturers have much higher margins than the EVs from startups like Tesla. Which will make them uncompetitive in the marketplace. This gets us back to the classic problem that it is hard to get organizations to significantly cut their margins. And even harder to convince your business partners to do so for your benefit.

reitzensteinm 8y ago
You are assuming that Tesla and future competition can operate their own dealerships more efficiently. They don't get their physical presence for free, and the cost is baked in to the sales price just the same way. Maybe Tesla can pull that off but there's no reason to expect other EV manufacturers will until they hit massive scale.
- kjksf 8y ago
  Let's say there are 2 grocery shops. All their costs and expenses are the same but one grocery shop sells twice as many products per square foot / unit of time. As someone interested in more profit, which store would you rather own? The argument you're responding to wasn't "Tesla's stores are dramatically more efficient". The argument is that Tesla stores sell Tesla's EV cars effectively (because that's the only thing they sell) and traditional dealership anti-sell EV cars because they make more money on selling ICE cars. This is not a conjecture. In addition to plenty of anecdotal evidence, there were qualitative studies both in US and Europe where researches sent "mystery shoppers" pretending to be interested in buying EV cars. The results were dismal. Many dealerships didn't know much about EVs themselves and in the worst case, they would literally lie about how bad EVs are. That will be a problem for GM, Ford, and others when they finally have good EV cars to sell. And there's no obvious solution to that. Car makers and dealerships are frenemies so it's not like GM can dictate terms to their dealers or that they can force dealers to do a good job selling EVs. The obvious solution (heavily subsidize dealers with bigger discounts) is bad for profit margins. Investors like profit margins and it'll look doubly bad because when they finally have EV cars to sell, they'll go through the same "loss due to low volume / production ramp" that Tesla went through in first half of 2018 and will be competing with Tesla's 2021 heavily cost optimized production.
  - reitzensteinm 8y ago
    In fact parent was making claims about the extra markup required for a traditional dealership to make a profit on EVs. This expense doesn't magically disappear on a Tesla, unless their dealerships are more efficient. Feel free to argue with my prisoner's dilemma point earlier in the thread if you want, which is in my view how this will play out. I've already agreed that what you're describing is an issue (and am at a loss why you took the time to write it out), I'm merely asserting that it's not going to spell the end of a quarter trillion dollars worth of wealth.
    - btilly 8y ago
      This expense doesn't magically disappear on a Tesla, unless their dealerships are more efficient. Walk into a regular dealership and then Tesla's version and you tell me which is more efficient. For just one example of the differences, consider the typical haggling over price where multiple sales people and managers interact with you for an extended period of time to try to get you to spend top dollar. Compare with the Tesla version where you're pointed at a computer open to their website where you can order and configure the car that you want. I've already agreed that what you're describing is an issue (and am at a loss why you took the time to write it out), I'm merely asserting that it's not going to spell the end of a quarter trillion dollars worth of wealth. On what principles will it not do so? Merely because it seems absurd? Or is there some logic that applies?
    - marvin 8y ago
      I've greatly enjoyed this thread, thanks to you and parents for taking the time to write it out. Just wanted to add, putting the "250 billion dollars of wealth destroyed" into perspective, that is more or less what Apple's loss of market cap during the last 6 months represents. Granted, that's to a large degree a speculative reduction in wealth. A similar re-valuation of the global car industry's future prospects would cause more mayhem due to well-established investments in supporting industries. It's fascinating how 250 billion dollars in reduced marked cap means "meh, it was overvalued" in Apple's case, whereas it would be a nasty surprise of historic proportions if it happened to the car industry.

by btilly 8y ago

reitzensteinm 8y ago

You are assuming that Tesla and future competition can operate their own dealerships more efficiently. They don't get their physical presence for free, and the cost is baked in to the sales price just the same way. Maybe Tesla can pull that off but there's no reason to expect other EV manufacturers will until they hit massive scale.

kjksf 8y ago
Let's say there are 2 grocery shops. All their costs and expenses are the same but one grocery shop sells twice as many products per square foot / unit of time. As someone interested in more profit, which store would you rather own? The argument you're responding to wasn't "Tesla's stores are dramatically more efficient". The argument is that Tesla stores sell Tesla's EV cars effectively (because that's the only thing they sell) and traditional dealership anti-sell EV cars because they make more money on selling ICE cars. This is not a conjecture. In addition to plenty of anecdotal evidence, there were qualitative studies both in US and Europe where researches sent "mystery shoppers" pretending to be interested in buying EV cars. The results were dismal. Many dealerships didn't know much about EVs themselves and in the worst case, they would literally lie about how bad EVs are. That will be a problem for GM, Ford, and others when they finally have good EV cars to sell. And there's no obvious solution to that. Car makers and dealerships are frenemies so it's not like GM can dictate terms to their dealers or that they can force dealers to do a good job selling EVs. The obvious solution (heavily subsidize dealers with bigger discounts) is bad for profit margins. Investors like profit margins and it'll look doubly bad because when they finally have EV cars to sell, they'll go through the same "loss due to low volume / production ramp" that Tesla went through in first half of 2018 and will be competing with Tesla's 2021 heavily cost optimized production.
- reitzensteinm 8y ago
  In fact parent was making claims about the extra markup required for a traditional dealership to make a profit on EVs. This expense doesn't magically disappear on a Tesla, unless their dealerships are more efficient. Feel free to argue with my prisoner's dilemma point earlier in the thread if you want, which is in my view how this will play out. I've already agreed that what you're describing is an issue (and am at a loss why you took the time to write it out), I'm merely asserting that it's not going to spell the end of a quarter trillion dollars worth of wealth.
  - btilly 8y ago
    This expense doesn't magically disappear on a Tesla, unless their dealerships are more efficient. Walk into a regular dealership and then Tesla's version and you tell me which is more efficient. For just one example of the differences, consider the typical haggling over price where multiple sales people and managers interact with you for an extended period of time to try to get you to spend top dollar. Compare with the Tesla version where you're pointed at a computer open to their website where you can order and configure the car that you want. I've already agreed that what you're describing is an issue (and am at a loss why you took the time to write it out), I'm merely asserting that it's not going to spell the end of a quarter trillion dollars worth of wealth. On what principles will it not do so? Merely because it seems absurd? Or is there some logic that applies?
  - marvin 8y ago
    I've greatly enjoyed this thread, thanks to you and parents for taking the time to write it out. Just wanted to add, putting the "250 billion dollars of wealth destroyed" into perspective, that is more or less what Apple's loss of market cap during the last 6 months represents. Granted, that's to a large degree a speculative reduction in wealth. A similar re-valuation of the global car industry's future prospects would cause more mayhem due to well-established investments in supporting industries. It's fascinating how 250 billion dollars in reduced marked cap means "meh, it was overvalued" in Apple's case, whereas it would be a nasty surprise of historic proportions if it happened to the car industry.