10 ms·
> IMHO, things make much more sense when you argue in fact instead of metaphor. This is true. However, are you actually arguing in fact? Your statements read a
by bobwaycott 13y ago
> IMHO, things make much more sense when you argue in fact instead of metaphor.
This is true. However, are you actually arguing in fact? Your statements read as an outside agent judging the intentions and motivations of other agents. Perhaps you're part of one of the groups and actually possess insider knowledge here?
Another potential outsider's reading of the bets and motivations at play (this taken from nearly 4 years working with auto dealerships):
The dealers have built up reliance on a system that allows them to screw over consumers in myriad ways that make them very good money every time a consumer needs a vehicle. They've already seen sales erode due to the economy, as well as the rise of internet-powered sales channels like craigslist, ebay, etc. While they cannot do anything about the former, the latter has been generally approached with dealers getting involved in listing their vehicles on the internet in an effort to constantly re-inject themselves into once private p2p marketplaces.
The dealers no doubt want Tesla to be successful as a manufacturer, they just do not want to allow a new precedent to establish wherein they are not standing as the gatekeepers between consumers and they cars they want. This has been a lucrative business model for them for a very long time. Everybody knows consumers hate it, and yet there's no other way to get your hands on a brand new car. Tesla has a fair amount of consumer interest, and dealers recognize this. So they want to make money off it, which will lead to even higher prices for consumers.
If Tesla succeeds, it's going to establish a manufacturer-operated dealership that vies directly with the existing model, leading to a situation where consumers may value that relationship higher than the one they've had to deal with for so long. Tesla will have an interesting-to-watch dynamic develop between its customers because the relationship will be direct -- right now, every other manufacturer establishes indirect relationships through the dealer proxy. In the Tesla-operated model, there will be no way for dealers to compete with the Tesla dealerships being the only one's with the new cars--this isn't like competing with the Honda dealership across town.
If the Tesla dealerships succeed and consumers take note, dealers would rightly fear other manufacturers following in its footsteps and setting up some trial direct dealerships. If that succeeds ... well, we can all see where that will lead. However, despite that kind of hopeful scenario, I think it is an irrational fear. Most manufacturers rely on dealers to more evenly distribute the risk of producing and selling expensive assets that require a lot of space (floorplan isn't free, and it's a significant dealer cost (which is why you should always buy the oldest car on the lot (measured in # days it has been in dealer inventory))). I seriously doubt automakers are very interested in taking on the work and headache of setting up more distribution networks and doing all of the various things dealers do now that actually serve their local markets. It seems more likely that they're trying to put out the wrong fire here.
Lastly, I'm not sure if this is what you were getting at, so apologies if it's just a longer stating of what you meant. Your comment was ambiguous as to what kind of success you think the Texas dealers are concerned with--ramping up the production facilities successfully so Tesla has enough cars to sell into the Texas market, or winning the fight to sell directly to consumers.
- gknoy 13y agoThat was a very well written explanation of what the dealers are doing (and why). Thanks for laying it out so clearly. | [F]loorplan isn't free, and it's a significant dealer cost | (which is why you should always buy the oldest car on the | lot (measured in # days it has been in dealer inventory)). I realize this is a little off topic, but can you go into more detail of why this matters? If a dealer has N cars taking up space, why do they care whether I take the one that came in yesterday versus the one that came in a month ago? Selling either seems like it would free up the same space, so how is it different? Are there financial incentives that are at play for them, or is it more that they tend to consider the sunk costs? More importantly, is that information I can find out and use to my advantage when negotiating?
- bobwaycott 13y agoIn it's simplest form, non-excessively peppered with financial terminology and equations: Floorplan is a line of credit dealers use to purchase their retail inventory. Each vehicle on the lot subjects the dealer to finance charges that begin accruing from the moment the dealer takes possession of the vehicle. So, say that the floorplan fees and interest are $100/day per vehicle (for simplicity's sake). The longer a car sits on the lot, the more profit the dealer is losing on that vehicle per day. Make sense? Why do dealers care? If you're being charged by the number of days a car is sitting on the lot, and a customer comes in an looks at a brand new, green car that arrived yesterday, and there is an identical twin in every way that is 400 days old, the salesman is going to push you to check out the older one and say they can make a special deal on it for some reason or another (sometimes they'll just say it's because it's been on the lot for a long time if they're really desperate). If you're paying interest on every product by the day, you want to get that out of your inventory as quickly as possible, because that's where you maximize your profit potential. Often, you can find vehicles on lots that are marked down lower than other similar/identical cars. This is almost always due to floorplan age (I'm assuming we are only talking about new cars here, because used cars bring in a lot of other variables). Some dealers operate in a way that they seek to capitalize on volume sales vs individual car sales as a way to both be more competitive and mitigate floorplan costs. These are often the best dealers to purchase from (and these are almost never luxury brand dealers) because they will typically sell every single vehicle at invoice price (or several hundred above), and build their profits instead around manufacturer incentives that pay out to the dealer $N per type of car in a graduated fashion where the payout increases as #s of types of cars sold increases. If you have a dealer in your area that advertises (and shows you the proof) that they sell at or near invoice, especially if that is their standard practice, you can safely assume they are a volume dealer. The salespersons are going to be focused on selling as many cars as they can because they are also making their income based on the number of cars sold, not a percentage of per-sale profits. Can you use this on the lot to your advantage? Sure. Just ask the dealer/salesperson how long the car has been on the lot.