26 ms·

Selling online without negotiated price is a big change. That should make the dealerships really uncomfortable in the long run… he's kind of saying "oh the deal

by jvm 4y ago

Selling online without negotiated price is a big change. That should make the dealerships really uncomfortable in the long run… he's kind of saying "oh the dealerships could rent out Mustangs" but is that actually realistic?

toomuchtodo 4y ago
Diplomacy is the art of saying “good dog” until you make it to the rock. Ford is learning what Tesla knew from the start: dealership interests aren’t aligned with EV manufacturers. There’s very little service revenue, and dealers are incentivized to add “market adjustments” to vehicles (which Ford dealers have been doing) creating a poor customer experience. Ford has existing dealerships and is going to have a heck of a time hacking around dealer franchise law compared to EV automakers who have no established dealer network. Someone on Twitter recently posted their Model S turning over 400,000km with only $3k in maintenance costs. Imagine at scale what that does to dealership revenue when 5, 10, 15 million EVs are sold per year (which will happen in the next 5-10 years). https://twitter.com/pluginalberta/status/1531406942119137281 https://twitter.com/pluginalberta/status/1531406942119137281 > "We only profit in one way: from new car sales and new car sales alone," Maron said. "We can't ... profit from services because our cars have far less parts than gas-powered cars. There's no regular service visits for engine tune-ups and oil changes. ... We don't make money off financing programs. We don't have insurance products or add-ons. A franchise dealer would look at this and scratch their heads. They would not know how to make money on this model." > Maron says Tesla is fully committed to its mission of replacing all gas-powered cars with electric vehicles -- a mission auto dealers may not be eager to embrace. > "We don't simply believe that electric vehicles represent a nice complement to gas-powered cars," Maron said. "We believe it's imperative they are replaced entirely by electric vehicles. ... It would be impossible for traditional dealers to convey this message adequately. This isn't a knock on them, but dealers are not fundamentally committed to the mission of EVs — we are. They make 99% of their revenue off of gas-powered cars. If you're opening a Yankees team store, are you going to ask a lifelong Red Sox fan to manage it?" https://www.buzzfeednews.com/article/johanabhuiyan/tesla-slams-general-motors-for-opposing-direct-sales https://www.buzzfeednews.com/article/johanabhuiyan/tesla-sla... (2016: 7 Reasons Why Tesla Doesn't Want To Sell Through Dealerships)
- climb_stealth 4y ago
  That is very impressive actually. Though your typo made me laugh out loud. > Someone on Twitter recently posted their Model S turning over 400km with only $3k in maintenance costs. 400 kilometers and a $3k maintenance bill somewhat reflects the image of Tesla that you see a lot on the internet. Whether or not that is actually the case.
  - toomuchtodo 4y ago
    Distance typo fixed, thank you! Happy to have provided a chuckle.
    - ars 4y ago
      > 400k km ? LOL Why not just use megameters? 400Mm OK, something about that looks odd. But what's the point in SI units if you can't actually use them? Maybe 250k miles?
      - taneq 4y ago
        Ah but is a megameter 10^6m or 2^20m? ;)
        s_tec 4y ago
        That would be a Mebimeter, according to SI. Whether or not this sounds silly is another issue.
      - 14u2c 4y ago
        When have you ever seen a car dashboard display Mm. It was perfectly clear what they were trying to convey.
      - _carbyau_ 4y ago
        I am totally using Mm next time someone talks cars/bikes with me. Thank you.
      - 4y ago
dheera 4y ago
I mean, I'm all for the dealerships dying. They do nothing but waste peoples' time. We don't actually need them and the scripts that the salespeople and buyers effectively recite to each other like a Shakespeare play.
option_key 4y ago
That's how it already works in Europe. Prices are set by the manufacturer and most cars are built to order. Dealerships rarely have their own branding, they basically work as franchises integrated with the manufacturer's network. Their role is to collect orders, provide test rides and service the cars.
thegranderson 4y ago
Commissions are 30-40% of an auto dealer's costs as a % of gross profit. If salespeople don't have to negotiate price, you can cut a lot of that cost and focus on higher margin (e.g., financing) and subscription products (e.g., parts & services) that deepen customer loyalty. The big groups will be better at making these investments (and the investments needed to sell/maintain EVs) and will continue to consolidate what remains a highly fragmented industry (i.e., the two largest dealer groups, AN and LAD were each only 1.75% of new car sales in 2021). I wouldn't cry for nor count the dealers out just yet.
jn1234 4y ago
It's because Ford hates the dealer markup they've started charging in last couple of years.
deleted 4y ago
[deleted]
jaredhansen 4y ago
This might be right, but I'm not so sure. Public perception is that dealerships are adverse to customers because of information asymmetry + price haggling, and that online sales will hurt them -- but in many conversations with multiple different car industry insiders, they all say that dealers make almost no money car sales, and instead make almost all of it on financing, service and parts. That you can almost model the car dealing parts of a dealership as lead gen for the service desk / finance desk. I don't know if that's right (anybody with more info care to comment?), but it's at least enough to give me pause on the "dealers will hate nonnegotiable pricing" claim.
- bluGill 4y ago
  You are missing used car sales. Most people who buy a new car trade in their old car and the dealer makes a killing on that. (when the car is leased that almost always amounts to a trade in from the dealer's perspective, though once in a while the lease company will sell the car in some way other than the dealer). You are correct that there is no real money in new car sales anymore.
sundvor 4y ago
Not having to worry about price negotiation is a massive plus in my books. Previously I could never sweet talk dealers into the kind of deals some of my mates could. The Tesla model is such an improvement.
deleted 4y ago
[deleted]
vineyardmike 4y ago
Yes car subscriptions are coming and they look like this. https://www.audiselect.com/audi-mobility/audi-select/com_en.html https://www.audiselect.com/audi-mobility/audi-select/com_en.... https://www.volvocars.com/us/care-by-volvo/ https://www.volvocars.com/us/care-by-volvo/ https://www.hyundai.com/in/en/mobility-solutions/hyundai-subscription https://www.hyundai.com/in/en/mobility-solutions/hyundai-sub... https://www.porsche.com/usa/accessoriesandservices/porschedrive/subscription/ https://www.porsche.com/usa/accessoriesandservices/porschedr...
Seriomino 4y ago
The dealership has to change anyway. If banking and Everything else is a good example, people are getting used to buy online. I bought even my current car without seeing it before. I bought my bike online as well. If more and more do that dealerships might loose too much revenue anyway to keep them afloat.

by jvm 4y ago

toomuchtodo 4y ago

Diplomacy is the art of saying “good dog” until you make it to the rock. Ford is learning what Tesla knew from the start: dealership interests aren’t aligned with EV manufacturers. There’s very little service revenue, and dealers are incentivized to add “market adjustments” to vehicles (which Ford dealers have been doing) creating a poor customer experience. Ford has existing dealerships and is going to have a heck of a time hacking around dealer franchise law compared to EV automakers who have no established dealer network. Someone on Twitter recently posted their Model S turning over 400,000km with only $3k in maintenance costs. Imagine at scale what that does to dealership revenue when 5, 10, 15 million EVs are sold per year (which will happen in the next 5-10 years). https://twitter.com/pluginalberta/status/1531406942119137281 https://twitter.com/pluginalberta/status/1531406942119137281 > "We only profit in one way: from new car sales and new car sales alone," Maron said. "We can't ... profit from services because our cars have far less parts than gas-powered cars. There's no regular service visits for engine tune-ups and oil changes. ... We don't make money off financing programs. We don't have insurance products or add-ons. A franchise dealer would look at this and scratch their heads. They would not know how to make money on this model." > Maron says Tesla is fully committed to its mission of replacing all gas-powered cars with electric vehicles -- a mission auto dealers may not be eager to embrace. > "We don't simply believe that electric vehicles represent a nice complement to gas-powered cars," Maron said. "We believe it's imperative they are replaced entirely by electric vehicles. ... It would be impossible for traditional dealers to convey this message adequately. This isn't a knock on them, but dealers are not fundamentally committed to the mission of EVs — we are. They make 99% of their revenue off of gas-powered cars. If you're opening a Yankees team store, are you going to ask a lifelong Red Sox fan to manage it?" https://www.buzzfeednews.com/article/johanabhuiyan/tesla-slams-general-motors-for-opposing-direct-sales https://www.buzzfeednews.com/article/johanabhuiyan/tesla-sla... (2016: 7 Reasons Why Tesla Doesn't Want To Sell Through Dealerships)

climb_stealth 4y ago
That is very impressive actually. Though your typo made me laugh out loud. > Someone on Twitter recently posted their Model S turning over 400km with only $3k in maintenance costs. 400 kilometers and a $3k maintenance bill somewhat reflects the image of Tesla that you see a lot on the internet. Whether or not that is actually the case.
- toomuchtodo 4y ago
  Distance typo fixed, thank you! Happy to have provided a chuckle.
  - ars 4y ago
    > 400k km ? LOL Why not just use megameters? 400Mm OK, something about that looks odd. But what's the point in SI units if you can't actually use them? Maybe 250k miles?
    - taneq 4y ago
      Ah but is a megameter 10^6m or 2^20m? ;)
      - s_tec 4y ago
        That would be a Mebimeter, according to SI. Whether or not this sounds silly is another issue.
    - 14u2c 4y ago
      When have you ever seen a car dashboard display Mm. It was perfectly clear what they were trying to convey.
    - _carbyau_ 4y ago
      I am totally using Mm next time someone talks cars/bikes with me. Thank you.
    - 4y ago

dheera 4y ago

I mean, I'm all for the dealerships dying. They do nothing but waste peoples' time. We don't actually need them and the scripts that the salespeople and buyers effectively recite to each other like a Shakespeare play.

option_key 4y ago

That's how it already works in Europe. Prices are set by the manufacturer and most cars are built to order. Dealerships rarely have their own branding, they basically work as franchises integrated with the manufacturer's network. Their role is to collect orders, provide test rides and service the cars.

thegranderson 4y ago

Commissions are 30-40% of an auto dealer's costs as a % of gross profit. If salespeople don't have to negotiate price, you can cut a lot of that cost and focus on higher margin (e.g., financing) and subscription products (e.g., parts & services) that deepen customer loyalty. The big groups will be better at making these investments (and the investments needed to sell/maintain EVs) and will continue to consolidate what remains a highly fragmented industry (i.e., the two largest dealer groups, AN and LAD were each only 1.75% of new car sales in 2021). I wouldn't cry for nor count the dealers out just yet.

jn1234 4y ago

It's because Ford hates the dealer markup they've started charging in last couple of years.

deleted 4y ago

[deleted]

jaredhansen 4y ago

This might be right, but I'm not so sure. Public perception is that dealerships are adverse to customers because of information asymmetry + price haggling, and that online sales will hurt them -- but in many conversations with multiple different car industry insiders, they all say that dealers make almost no money car sales, and instead make almost all of it on financing, service and parts. That you can almost model the car dealing parts of a dealership as lead gen for the service desk / finance desk. I don't know if that's right (anybody with more info care to comment?), but it's at least enough to give me pause on the "dealers will hate nonnegotiable pricing" claim.

bluGill 4y ago
You are missing used car sales. Most people who buy a new car trade in their old car and the dealer makes a killing on that. (when the car is leased that almost always amounts to a trade in from the dealer's perspective, though once in a while the lease company will sell the car in some way other than the dealer). You are correct that there is no real money in new car sales anymore.

sundvor 4y ago

Not having to worry about price negotiation is a massive plus in my books. Previously I could never sweet talk dealers into the kind of deals some of my mates could. The Tesla model is such an improvement.

deleted 4y ago

[deleted]

vineyardmike 4y ago

Yes car subscriptions are coming and they look like this. https://www.audiselect.com/audi-mobility/audi-select/com_en.html https://www.audiselect.com/audi-mobility/audi-select/com_en.... https://www.volvocars.com/us/care-by-volvo/ https://www.volvocars.com/us/care-by-volvo/ https://www.hyundai.com/in/en/mobility-solutions/hyundai-subscription https://www.hyundai.com/in/en/mobility-solutions/hyundai-sub... https://www.porsche.com/usa/accessoriesandservices/porschedrive/subscription/ https://www.porsche.com/usa/accessoriesandservices/porschedr...

Seriomino 4y ago

The dealership has to change anyway. If banking and Everything else is a good example, people are getting used to buy online. I bought even my current car without seeing it before. I bought my bike online as well. If more and more do that dealerships might loose too much revenue anyway to keep them afloat.