8 ms·

This is what happens when a single player (CDK Global) has massive market share (90% when measured by number of vehicles sold [0] --- EDIT: this is actually the

by n4r9 2y ago

This is what happens when a single player (CDK Global) has massive market share (90% when measured by number of vehicles sold [0] --- EDIT: this is actually the combined market share of CDK + Reynolds, who have a non-compete agreement ---). The entire industry becomes fragile to product issues and/or malicious attacks. Anti-trust is important. [0] https://casetext.com/case/loop-llc-v-cdk-global-llc-in-re-dealer-mgmt-sys-antitrust-litig https://casetext.com/case/loop-llc-v-cdk-global-llc-in-re-de...

ethbr1 2y ago
Also, the vendor becomes insulated from customer demands. Why patch things or work your ass off, when none of your customers have an alternative? (especially if PE buys the business or CEOs get a stock price focus and gut engineering to keep-the-lights-on levels)
- mywittyname 2y ago
  There's a quiet irony in car dealership networks being fucked like this. They spend so much money ensuring their government-mandated monopoly, only to fall victim to a different kind of monopoly.
  - throwaway55533 2y ago
    > government-mandated monopoly Could you expand on this, aren't U.S. car dealerships private businesses competing in a (mostly) unregulated market?
    - PaywallBuster 2y ago
      > direct manufacturer auto sales are prohibited in many states by franchise laws requiring that new cars be sold only by independent dealers. https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes not a monopoly per se, but "forced demand"
      - tejohnso 2y ago
        Doesn't just about everyone hate dealing with a dealership? Shouldn't it be very easy to vote to fix that in a democracy?
        Sohcahtoa82 2y ago
        Not when dealers pay politicians to keep it that way. Even if you ran a petition and forced a state ballot measure, dealers would run a propaganda campaign to make it sound like a pro-Tesla measure.
        red-iron-pine 2y ago
        "they're giving YOUR RIGHTS away to BIG CORPORATIONS. Vote NO on Bill 9928" when, of course, that very line was funded by large corporations. such is life in Modern America
        abtinf 2y ago
        See “Public Choice Theory”: https://en.m.wikipedia.org/wiki/Public_choice https://en.m.wikipedia.org/wiki/Public_choice Or watch the BBC comedy “Yes, Minister” and “Yes, Prime Minister” to grasp how government (as well as most large companies) actually works.
        kbolino 2y ago
        Yep. Basically, in no election we can practically foresee, is this going to be a politically salient issue. The voters aren't motivated enough about it, and the interest groups involved are mostly aligned on keeping the status quo. Elections put people and parties into power, not individual ideas.
        tmcdos 2y ago
        Direct democracy (https://klissarov.eu/en/books/platform-of-the-pp-direct-democracy/ https://klissarov.eu/en/books/platform-of-the-pp-direct-demo...) can change the status quo - if enough people get up from the couch and do vote for it. It just needs to reach a critical mass - but at the moment people are too lazy and wait for someone else to do the job.
    - lotsofpulp 2y ago
      No, they only exist because state laws prevented manufacturers from selling directly to customers.
      - kube-system 2y ago
        They'd originally existed because manufacturers didn't have enough resources to sell directly to customers, and they'd probably still exist (in a smaller capacity) today even if manufacturers could sell direct. Because there still are some manufacturers that sell low enough volumes in the US that it would probably still financially make sense for them to lean on a dealer network. But for sure, Ford, GM, Toyota, Stellantis, etc would probably love to sell direct.
      - bcrosby95 2y ago
        So you're saying dealerships are more of a monopoly than manufacturers selling directly to customers?
    - mywittyname 2y ago
      Car dealerships exist in what is probably the most favorable regulatory environment of any business. It's a side effect of owners of car dealerships often being the wealthiest people in a locale, and being politically active. If you look up donations to your local and state politicians, you'll probably find several of the largest donors have last names that happen to match that of the local Ford or Chevy dealership network. They have rules that protect them from competition from manufactures, rules that protect them from them from competition from other dealerships (i.e., Ford can't allow a dealership to open across the street from one they don't like), in many states, there are special rules for inheriting a dealership.
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  - akira2501 2y ago
    > their government-mandated monopoly Anyone can open a dealership, except manufacturers, and it looks to be a reasonable and non discriminatory process. Critically, the government does not mandate the minimum or maximum number of dealerships in an area, so competition is not harmed in any way. This really does not seem like a monopoly issue.
    - snotrockets 2y ago
      Good luck trying. Dealerships hold municipal governments by the balls.
      - akira2501 2y ago
        Well.. where I live.. most municipal governments tax car dealerships to the point where they all exist mostly in one county that doesn't tax them as much. In the county that does, they have every incentive to open more, and dealerships have healthy competition and turnover. It doesn't seem like there are any 800lb gorillas in the market where I live.
    - throwaway7ahgb 2y ago
      Unpopular opinion: Manufacturers like this model, in the sense that artists "like" ticketmaster. Dealerships take a lot of inventory and capital risk away from manufactures. Most (unlike Tesla) do not what to deal with retail customers directly.
  - gamblor956 2y ago
    People will hate on car dealerships until the automakers remind everyone (again) why dealership protection laws were passed in nearly every state in the first place. You basically see this with Tesla: refusal to comply with local lemon laws, the CEO personally banning customers from buying his cars, repairs that take months, service centers hundreds or thousands of miles away.
toomuchtodo 2y ago
I encourage a complaint to be filed. https://www.justice.gov/atr/complaint-center https://www.justice.gov/atr/complaint-center https://www.ftc.gov/advice-guidance/competition-guidance/antitrust-complaint-intake https://www.ftc.gov/advice-guidance/competition-guidance/ant...
WarOnPrivacy 2y ago
> CDK Global has massive market share 90% when measured by number of vehicles sold I suspect we're missing some nuance in that 90%. US dealerships are dominated by UCS(Reynolds&Reynolds) and CDK. ADP and DealerTrack have a fair amount. I used to provide support for three of those.
- juliangoldsmith 2y ago
  ADP is CDK as of a few years ago. I've seen a fair number of Auto/Mate stores in addition to DealerTrack, but not as many as CDK and R&R.
juliangoldsmith 2y ago
That 90% is for both of the two biggest DMSes, CDK and Reynolds & Reynolds. Both DMSes have been around since the '70s or so, so they're probably considered a safe option by a lot of dealers.
- n4r9 2y ago
  Ah, you're correct. However, the linked litigation doc argues that the two have an agreement not to compete with each other. It also explains that it's very disruptive for a dealership business to transition to a new data management system.
  - juliangoldsmith 2y ago
    I believe the litigation was about data integration, due to the mentions of Authenticom. Authenticom was a vendor my company used until we needed to start getting data directly from R&R. (IIRC we were a third party on a lawsuit related to that.) Switching DMSes is likely disruptive, but is still pretty common. We've had dealerships do it every now and then.
- blorenz 2y ago
  Is R&R still that large? A few NADAs ago I approached them to see about getting a direct integration. Only one of my customers was R&R at that time. ReyRey acted very elitist and told me that they had no interest. Fast forward to this last NADA where I approached ReyRey again with only three customers. I asked them if we could integrated with three and they stated that they would even do a single customer. Quite the change of tune. I asked ballpark what it would be and they said "low 5 digits". Not even CDK is that expensive with their certification process. This will also be interesting to see how it affects their their long in-development and repeatedly stalled Fortellis product. They are attempting to release it as a DMS agnostic solution which I did not think that other DMSes will gravitate to just because it comes out of CDK. This attack is just another reason for a competitor DMS to not use it.
  - juliangoldsmith 2y ago
MangoCoffee 2y ago
why didn't Silicon Valley try to disrupt this market?
- numbsafari 2y ago
  Seems to me like now is a good time to raise some money around this particular issue.
- mistrial9 2y ago
  they did - see Tesla
  - nilamo 2y ago
    How much of a disruption was that? Teslas still can't be sold everywhere (such as anywhere in Michigan)...
- blorenz 2y ago
  I personally can't immediately envision what the disruption would look like. Do you have any notions? Tekion is one of the newer DMSes to be built with modern architecture and be cloud-native versus the retrofit of all the other DMSes (which were retrofits of other types of solutions before they were automotive). I would love to see something be the Uber or Airbnb for Deal Management.
- sofixa 2y ago
  What would the value add or differentiator be? If you try to go with cheaper, the incumbents will take note and adjust their prices accordingly (it's software, prices are much more flexible than physical stuff).
- RowanH 2y ago
  Close to this market - ShopMonkey is doing it for general garage work, and we, GlobalWorkshop, are doing it for high end/custom vehicles (restoration/restomods/small motorsport teams). I'm pretty sure one of our recent trialling companies have been using CDK and desperate to get away from it for their restoration work. "It hasn't been updated in years" was the quote last week..
hubraumhugo 2y ago
My entrepreneurial mind immediately thinks: Let's create a better solution to revolutionize this industry and make the old, expensive incumbents obsolete. We can drive to the affected car dealers and migrate them one by one. Of course, I'm not going to do it and it's probably extremely hard :)
- ortusdux 2y ago
  I'd rather we remove laws that ban direct sales. https://www.justice.gov/atr/economic-effects-state-bans-direct-manufacturer-sales-car-buyers https://www.justice.gov/atr/economic-effects-state-bans-dire...
- tmpz22 2y ago
  Enterprise vendors have gotten better at locking in customers on multi-year contracts which takes away some of the biggest upside to chipping away at the market. Often a challenger will come in and snag a few smaller deals but the Monopoly has a plethora of options to swat it away - rev up their larger more experienced product team to compete, lobby for regulation, poach from the challenger, acquire the challenger, tank prices in the one area the challenger has traction, and much more.
  - lainga 2y ago
    I read a particularly disgusting book called "Competitive Strategy" by Michael E. Porter, that plainly explains how and when to carry out each of the monopoly-preserving actions you have listed
    - HeyLaughingBoy 2y ago
      From what (little) I know, Porter's generally considered to be the expert on Strategy. What did you find disgusting about the book?
      - lainga 2y ago
        I guess we are coming from different worldviews. These were IIRC collectively referred to as "retaliation" by the incumbent firm and none of them sat very well with me as conducive to innovation. - lobby for regulation - poach from the challenger - tank prices in the one area the challenger has traction I believe Porter also mentioned trying to secure vendor lock-in.
hnburnsy 2y ago
Maybe part of the problem is the reliance on the cloud. Will the pendulum ever swing back to on prem?
- benfutor 2y ago
  Workloads are starting to converge back to on-prem and there hasn't been so much pressure on only cloud. Hybrid approaches seem to be prevailing (for much larger co's)
  - benfutor 2y ago
    Specifically, 83% of enterprise CIOs plan to repatriate at least some workloads back to private cloud/on-prem according to a Barclays CIO Survey program
- wmf 2y ago
  On-prem is less likely to get patched and it's somewhat more work for the criminals to breach each installation individually but overall it's probably less secure.
  - htrp 2y ago
    Well it's single point of failure vs distributed resiliency. You could hack your local dealership but if they can't sell, the customers just go to the dealership down the street, which serves as a very high incentive to get your systems back up and running.
Spastche 2y ago
>EDIT: this is actually the combined market share of CDK + Reynolds, who have a non-compete agreement I would bet money they have non-competes and no-hire agreements with more companies than that - the entire industry is full of it
rootusrootus 2y ago
IIRC our market share is closer to 70%. It also includes businesses that people don't usually think of but are broadly similar to car dealerships in business model and therefore can be served with nearly identical software. Heavy equipment, etc. R&R doesn't have as wide a product offering as we do, and the upstart DMS providers trying to disrupt the market are even narrower than that. For all its problems, CDK is dominant for good reason.
- RowanH 2y ago
  Wow so you work at CDK. I wouldn't wish the sh-t storm you guys must be going through on our worst enemy. I was talking with one of your clients today (we're not competitors) and you just don't realise how far screwed some of these companies are right now. It actually made an instant upsell today of 'here's our additional cloud sync' feature. No questions, no umming and ahhing, it's just 'yep done, add it, turn it on'. Heck we probably undersold it by 10x. I hope you guys start getting some sense of normality soon and get systems back online.
- n4r9 2y ago
  I can't argue against market dominance purely based on product. However it looks to me like the dominance is exacerbated by a raft of anti-competitive practises such as colluding with other big players and placing artificial restrictions on dealer and third-party data.

by n4r9 2y ago

ethbr1 2y ago

Also, the vendor becomes insulated from customer demands. Why patch things or work your ass off, when none of your customers have an alternative? (especially if PE buys the business or CEOs get a stock price focus and gut engineering to keep-the-lights-on levels)

mywittyname 2y ago
There's a quiet irony in car dealership networks being fucked like this. They spend so much money ensuring their government-mandated monopoly, only to fall victim to a different kind of monopoly.
- throwaway55533 2y ago
  > government-mandated monopoly Could you expand on this, aren't U.S. car dealerships private businesses competing in a (mostly) unregulated market?
  - PaywallBuster 2y ago
    > direct manufacturer auto sales are prohibited in many states by franchise laws requiring that new cars be sold only by independent dealers. https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes not a monopoly per se, but "forced demand"
    - tejohnso 2y ago
      Doesn't just about everyone hate dealing with a dealership? Shouldn't it be very easy to vote to fix that in a democracy?
      - Sohcahtoa82 2y ago
        Not when dealers pay politicians to keep it that way. Even if you ran a petition and forced a state ballot measure, dealers would run a propaganda campaign to make it sound like a pro-Tesla measure.
        red-iron-pine 2y ago
        "they're giving YOUR RIGHTS away to BIG CORPORATIONS. Vote NO on Bill 9928" when, of course, that very line was funded by large corporations. such is life in Modern America
      - abtinf 2y ago
        See “Public Choice Theory”: https://en.m.wikipedia.org/wiki/Public_choice https://en.m.wikipedia.org/wiki/Public_choice Or watch the BBC comedy “Yes, Minister” and “Yes, Prime Minister” to grasp how government (as well as most large companies) actually works.
        kbolino 2y ago
        Yep. Basically, in no election we can practically foresee, is this going to be a politically salient issue. The voters aren't motivated enough about it, and the interest groups involved are mostly aligned on keeping the status quo. Elections put people and parties into power, not individual ideas.
        tmcdos 2y ago
        Direct democracy (https://klissarov.eu/en/books/platform-of-the-pp-direct-democracy/ https://klissarov.eu/en/books/platform-of-the-pp-direct-demo...) can change the status quo - if enough people get up from the couch and do vote for it. It just needs to reach a critical mass - but at the moment people are too lazy and wait for someone else to do the job.
  - lotsofpulp 2y ago
    No, they only exist because state laws prevented manufacturers from selling directly to customers.
    - kube-system 2y ago
      They'd originally existed because manufacturers didn't have enough resources to sell directly to customers, and they'd probably still exist (in a smaller capacity) today even if manufacturers could sell direct. Because there still are some manufacturers that sell low enough volumes in the US that it would probably still financially make sense for them to lean on a dealer network. But for sure, Ford, GM, Toyota, Stellantis, etc would probably love to sell direct.
    - bcrosby95 2y ago
      So you're saying dealerships are more of a monopoly than manufacturers selling directly to customers?
  - mywittyname 2y ago
    Car dealerships exist in what is probably the most favorable regulatory environment of any business. It's a side effect of owners of car dealerships often being the wealthiest people in a locale, and being politically active. If you look up donations to your local and state politicians, you'll probably find several of the largest donors have last names that happen to match that of the local Ford or Chevy dealership network. They have rules that protect them from competition from manufactures, rules that protect them from them from competition from other dealerships (i.e., Ford can't allow a dealership to open across the street from one they don't like), in many states, there are special rules for inheriting a dealership.
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- akira2501 2y ago
  > their government-mandated monopoly Anyone can open a dealership, except manufacturers, and it looks to be a reasonable and non discriminatory process. Critically, the government does not mandate the minimum or maximum number of dealerships in an area, so competition is not harmed in any way. This really does not seem like a monopoly issue.
  - snotrockets 2y ago
    Good luck trying. Dealerships hold municipal governments by the balls.
    - akira2501 2y ago
      Well.. where I live.. most municipal governments tax car dealerships to the point where they all exist mostly in one county that doesn't tax them as much. In the county that does, they have every incentive to open more, and dealerships have healthy competition and turnover. It doesn't seem like there are any 800lb gorillas in the market where I live.
  - throwaway7ahgb 2y ago
    Unpopular opinion: Manufacturers like this model, in the sense that artists "like" ticketmaster. Dealerships take a lot of inventory and capital risk away from manufactures. Most (unlike Tesla) do not what to deal with retail customers directly.
- gamblor956 2y ago
  People will hate on car dealerships until the automakers remind everyone (again) why dealership protection laws were passed in nearly every state in the first place. You basically see this with Tesla: refusal to comply with local lemon laws, the CEO personally banning customers from buying his cars, repairs that take months, service centers hundreds or thousands of miles away.

toomuchtodo 2y ago

I encourage a complaint to be filed. https://www.justice.gov/atr/complaint-center https://www.justice.gov/atr/complaint-center https://www.ftc.gov/advice-guidance/competition-guidance/antitrust-complaint-intake https://www.ftc.gov/advice-guidance/competition-guidance/ant...

WarOnPrivacy 2y ago

> CDK Global has massive market share 90% when measured by number of vehicles sold I suspect we're missing some nuance in that 90%. US dealerships are dominated by UCS(Reynolds&Reynolds) and CDK. ADP and DealerTrack have a fair amount. I used to provide support for three of those.

juliangoldsmith 2y ago
ADP is CDK as of a few years ago. I've seen a fair number of Auto/Mate stores in addition to DealerTrack, but not as many as CDK and R&R.

juliangoldsmith 2y ago

That 90% is for both of the two biggest DMSes, CDK and Reynolds & Reynolds. Both DMSes have been around since the '70s or so, so they're probably considered a safe option by a lot of dealers.

n4r9 2y ago
Ah, you're correct. However, the linked litigation doc argues that the two have an agreement not to compete with each other. It also explains that it's very disruptive for a dealership business to transition to a new data management system.
- juliangoldsmith 2y ago
  I believe the litigation was about data integration, due to the mentions of Authenticom. Authenticom was a vendor my company used until we needed to start getting data directly from R&R. (IIRC we were a third party on a lawsuit related to that.) Switching DMSes is likely disruptive, but is still pretty common. We've had dealerships do it every now and then.
blorenz 2y ago
Is R&R still that large? A few NADAs ago I approached them to see about getting a direct integration. Only one of my customers was R&R at that time. ReyRey acted very elitist and told me that they had no interest. Fast forward to this last NADA where I approached ReyRey again with only three customers. I asked them if we could integrated with three and they stated that they would even do a single customer. Quite the change of tune. I asked ballpark what it would be and they said "low 5 digits". Not even CDK is that expensive with their certification process. This will also be interesting to see how it affects their their long in-development and repeatedly stalled Fortellis product. They are attempting to release it as a DMS agnostic solution which I did not think that other DMSes will gravitate to just because it comes out of CDK. This attack is just another reason for a competitor DMS to not use it.
- juliangoldsmith 2y ago

MangoCoffee 2y ago

why didn't Silicon Valley try to disrupt this market?

numbsafari 2y ago
Seems to me like now is a good time to raise some money around this particular issue.
mistrial9 2y ago
they did - see Tesla
- nilamo 2y ago
  How much of a disruption was that? Teslas still can't be sold everywhere (such as anywhere in Michigan)...
blorenz 2y ago
I personally can't immediately envision what the disruption would look like. Do you have any notions? Tekion is one of the newer DMSes to be built with modern architecture and be cloud-native versus the retrofit of all the other DMSes (which were retrofits of other types of solutions before they were automotive). I would love to see something be the Uber or Airbnb for Deal Management.
sofixa 2y ago
What would the value add or differentiator be? If you try to go with cheaper, the incumbents will take note and adjust their prices accordingly (it's software, prices are much more flexible than physical stuff).
RowanH 2y ago
Close to this market - ShopMonkey is doing it for general garage work, and we, GlobalWorkshop, are doing it for high end/custom vehicles (restoration/restomods/small motorsport teams). I'm pretty sure one of our recent trialling companies have been using CDK and desperate to get away from it for their restoration work. "It hasn't been updated in years" was the quote last week..

hubraumhugo 2y ago

My entrepreneurial mind immediately thinks: Let's create a better solution to revolutionize this industry and make the old, expensive incumbents obsolete. We can drive to the affected car dealers and migrate them one by one. Of course, I'm not going to do it and it's probably extremely hard :)

ortusdux 2y ago
I'd rather we remove laws that ban direct sales. https://www.justice.gov/atr/economic-effects-state-bans-direct-manufacturer-sales-car-buyers https://www.justice.gov/atr/economic-effects-state-bans-dire...
tmpz22 2y ago
Enterprise vendors have gotten better at locking in customers on multi-year contracts which takes away some of the biggest upside to chipping away at the market. Often a challenger will come in and snag a few smaller deals but the Monopoly has a plethora of options to swat it away - rev up their larger more experienced product team to compete, lobby for regulation, poach from the challenger, acquire the challenger, tank prices in the one area the challenger has traction, and much more.
- lainga 2y ago
  I read a particularly disgusting book called "Competitive Strategy" by Michael E. Porter, that plainly explains how and when to carry out each of the monopoly-preserving actions you have listed
  - HeyLaughingBoy 2y ago
    From what (little) I know, Porter's generally considered to be the expert on Strategy. What did you find disgusting about the book?
    - lainga 2y ago
      I guess we are coming from different worldviews. These were IIRC collectively referred to as "retaliation" by the incumbent firm and none of them sat very well with me as conducive to innovation. - lobby for regulation - poach from the challenger - tank prices in the one area the challenger has traction I believe Porter also mentioned trying to secure vendor lock-in.

hnburnsy 2y ago

Maybe part of the problem is the reliance on the cloud. Will the pendulum ever swing back to on prem?

benfutor 2y ago
Workloads are starting to converge back to on-prem and there hasn't been so much pressure on only cloud. Hybrid approaches seem to be prevailing (for much larger co's)
- benfutor 2y ago
  Specifically, 83% of enterprise CIOs plan to repatriate at least some workloads back to private cloud/on-prem according to a Barclays CIO Survey program
wmf 2y ago
On-prem is less likely to get patched and it's somewhat more work for the criminals to breach each installation individually but overall it's probably less secure.
- htrp 2y ago
  Well it's single point of failure vs distributed resiliency. You could hack your local dealership but if they can't sell, the customers just go to the dealership down the street, which serves as a very high incentive to get your systems back up and running.

Spastche 2y ago

>EDIT: this is actually the combined market share of CDK + Reynolds, who have a non-compete agreement I would bet money they have non-competes and no-hire agreements with more companies than that - the entire industry is full of it

rootusrootus 2y ago

IIRC our market share is closer to 70%. It also includes businesses that people don't usually think of but are broadly similar to car dealerships in business model and therefore can be served with nearly identical software. Heavy equipment, etc. R&R doesn't have as wide a product offering as we do, and the upstart DMS providers trying to disrupt the market are even narrower than that. For all its problems, CDK is dominant for good reason.

RowanH 2y ago
Wow so you work at CDK. I wouldn't wish the sh-t storm you guys must be going through on our worst enemy. I was talking with one of your clients today (we're not competitors) and you just don't realise how far screwed some of these companies are right now. It actually made an instant upsell today of 'here's our additional cloud sync' feature. No questions, no umming and ahhing, it's just 'yep done, add it, turn it on'. Heck we probably undersold it by 10x. I hope you guys start getting some sense of normality soon and get systems back online.
n4r9 2y ago
I can't argue against market dominance purely based on product. However it looks to me like the dominance is exacerbated by a raft of anti-competitive practises such as colluding with other big players and placing artificial restrictions on dealer and third-party data.