4 ms·

I'm confused by all the comments here. Why is everybody so focused on the cons of dealerships instead of the cons if manufacturers own and run all the dealershi

by Sakos 4y ago

I'm confused by all the comments here. Why is everybody so focused on the cons of dealerships instead of the cons if manufacturers own and run all the dealerships and the potential consequences, or even why it was regulated to be this way in the first place.

ceejayoz 4y ago
Would you like to highlight some? Why was it regulated this way? I can't find a great explanation, and "because it makes a lot of money for locally powerful business owners" seems to be the most common explanation floated.
- Sakos 4y ago
  I'm not familiar enough with the topic to be able to contribute meaningfully. It feels like most people here aren't, it's mostly anecdata with a tinge of libertarianism. At most I can say I'm vaguely aware that early in US history there were a lot of issues around monopolies/oligopolies (see company towns) that lead to antitrust laws and by extension laws regarding dealerships. But I'd have to do more research to be able to say anything more concrete.
mdorazio 4y ago
I've worked for several OEMs and have talked to dealers about this a bit. Here's a quick run-down. No domestic OEM sprang into existence with billions of dollars in the bank to spin up a nationwide network of showrooms and repair centers. As they were growing production slowly, they had to rely on small businesses around the country to sell their products for them, which also significantly improved capital when they were growing (dealers bought from the OEM, then sold to customers, potentially thousands of miles away from factories). Over time, these businesses became franchised by the OEMs to allow them to exert some control over the customer experience, standardize parts and repair work, etc. So that's why dealers became a thing in the first place. The tricky bit of the history is why the state laws in favor of dealers came into existence. It's very fuzzy, but in effect the Detroit "big three" became very large and powerful, with enough money to start stepping in with company-owned dealerships. The local franchised dealers, who by that time had also become quite embedded in communities and politics, thought that this was unfair since the OEMs could undercut local dealers on price, thus they lobbied their states to put in place anti-competition laws. And they were successful. That's about it. As far as I've ever been able to tell, customer experience and monopoly prevention never really factored into it other than as dubious arguments by the dealers themselves. Now here we are ~70 years later and the market has changed significantly, but the protection laws are still there. Fwiw, dealer margins vary by vehicle and brand, but 5-10% for mass market vehicles is common. That's money the OEMs would rather not pay out to third parties. Dealers also have massive markups on service and love warranty work because they can rake OEMs over the coals with it. The best argument I've seen in favor of dealers is that an OEM-run dealership would be incentivized to some degree to dismiss warranty work as unnecessary, while a franchised dealer tries to find every warranty hour they possibly can. That's about it, though - there's so much brand and 3rd party competition in the market these days that other arguments usually don't make much sense.
fallingknife 4y ago
The manufacturer is necessary and the independent dealership is not. So I will always have to deal with the cons of the manufacturer. If you would like to defend independent dealerships, then tell me how exactly I would be worse off without them instead of just mentioning undefined "consequences."
- Sakos 4y ago
  I'm not defending anything. I just don't like condemning one thing without knowing the overall picture. All the comments I saw were like a bubble of identical opinions and people circlejerking about the awfulness of dealerships without any real substance. I sort of expect more from HN. I'm not an expert about the auto industry or the auto market or the regulations and their history and I'm in no position to tell anybody here they're wrong. I just wish people would consider the wider context. Why do these regulations exist? What benefits are there? Downsides? What changes if these regulations are changed or removed? What regulatory changes can be made to improve the state of dealerships? Maybe allowing manufacturers to run their own dealerships would create more competition and put downward pressure on prices and improve quality of service across the industry. How do you deal with the threat of manufacturers edging out all private dealerships so that they're the only option? Will the market eventually become worse because of a lack of competition among dealerships? How do you ensure manufacturers don't treat independent dealerships unfairly and exploit the vertical integration in an anticompetitive way? How do you prevent regulatory capture through manufacturers? All I see here is "dealerships bad". And yes, the examples I've seen are bad and most things I've heard about dealerships really suck. But the best solution isn't necessarily to get rid of independent ones. Maybe it is, maybe it's not (imo, pretty likely not).
  - int_19h 4y ago
    > How do you deal with the threat of manufacturers edging out all private dealerships so that they're the only option? That's what we have anti-trust for.
    - Sakos 4y ago
mensetmanusman 4y ago
Should Apple be forced to go through Best Buy?

by Sakos 4y ago

ceejayoz 4y ago

Would you like to highlight some? Why was it regulated this way? I can't find a great explanation, and "because it makes a lot of money for locally powerful business owners" seems to be the most common explanation floated.

Sakos 4y ago
I'm not familiar enough with the topic to be able to contribute meaningfully. It feels like most people here aren't, it's mostly anecdata with a tinge of libertarianism. At most I can say I'm vaguely aware that early in US history there were a lot of issues around monopolies/oligopolies (see company towns) that lead to antitrust laws and by extension laws regarding dealerships. But I'd have to do more research to be able to say anything more concrete.

mdorazio 4y ago

I've worked for several OEMs and have talked to dealers about this a bit. Here's a quick run-down. No domestic OEM sprang into existence with billions of dollars in the bank to spin up a nationwide network of showrooms and repair centers. As they were growing production slowly, they had to rely on small businesses around the country to sell their products for them, which also significantly improved capital when they were growing (dealers bought from the OEM, then sold to customers, potentially thousands of miles away from factories). Over time, these businesses became franchised by the OEMs to allow them to exert some control over the customer experience, standardize parts and repair work, etc. So that's why dealers became a thing in the first place. The tricky bit of the history is why the state laws in favor of dealers came into existence. It's very fuzzy, but in effect the Detroit "big three" became very large and powerful, with enough money to start stepping in with company-owned dealerships. The local franchised dealers, who by that time had also become quite embedded in communities and politics, thought that this was unfair since the OEMs could undercut local dealers on price, thus they lobbied their states to put in place anti-competition laws. And they were successful. That's about it. As far as I've ever been able to tell, customer experience and monopoly prevention never really factored into it other than as dubious arguments by the dealers themselves. Now here we are ~70 years later and the market has changed significantly, but the protection laws are still there. Fwiw, dealer margins vary by vehicle and brand, but 5-10% for mass market vehicles is common. That's money the OEMs would rather not pay out to third parties. Dealers also have massive markups on service and love warranty work because they can rake OEMs over the coals with it. The best argument I've seen in favor of dealers is that an OEM-run dealership would be incentivized to some degree to dismiss warranty work as unnecessary, while a franchised dealer tries to find every warranty hour they possibly can. That's about it, though - there's so much brand and 3rd party competition in the market these days that other arguments usually don't make much sense.

fallingknife 4y ago

The manufacturer is necessary and the independent dealership is not. So I will always have to deal with the cons of the manufacturer. If you would like to defend independent dealerships, then tell me how exactly I would be worse off without them instead of just mentioning undefined "consequences."

Sakos 4y ago
I'm not defending anything. I just don't like condemning one thing without knowing the overall picture. All the comments I saw were like a bubble of identical opinions and people circlejerking about the awfulness of dealerships without any real substance. I sort of expect more from HN. I'm not an expert about the auto industry or the auto market or the regulations and their history and I'm in no position to tell anybody here they're wrong. I just wish people would consider the wider context. Why do these regulations exist? What benefits are there? Downsides? What changes if these regulations are changed or removed? What regulatory changes can be made to improve the state of dealerships? Maybe allowing manufacturers to run their own dealerships would create more competition and put downward pressure on prices and improve quality of service across the industry. How do you deal with the threat of manufacturers edging out all private dealerships so that they're the only option? Will the market eventually become worse because of a lack of competition among dealerships? How do you ensure manufacturers don't treat independent dealerships unfairly and exploit the vertical integration in an anticompetitive way? How do you prevent regulatory capture through manufacturers? All I see here is "dealerships bad". And yes, the examples I've seen are bad and most things I've heard about dealerships really suck. But the best solution isn't necessarily to get rid of independent ones. Maybe it is, maybe it's not (imo, pretty likely not).
- int_19h 4y ago
  > How do you deal with the threat of manufacturers edging out all private dealerships so that they're the only option? That's what we have anti-trust for.
  - Sakos 4y ago

mensetmanusman 4y ago

Should Apple be forced to go through Best Buy?