4 ms·

If they can't compete, that means they're not providing sufficient value. What value would I, as a consumer, enjoy by doing business with a local dealer rather

by maratd 12y ago

If they can't compete, that means they're not providing sufficient value. What value would I, as a consumer, enjoy by doing business with a local dealer rather than the manufacturer? I don't think the fear here is that they would "undercut them". I would do business directly with Ford, Toyota, etc. even if the price were the same. That's what they're afraid of.

pcurve 12y ago
exactly. You don't see LG, Samsung, GE Appliances, Kenmore anxious to setup their own retail fronts because retail buying experience and cost structure of that model make financial sense for everybody involved. The current franchise model serves dealers well, but it really shortchanges customers, to the point that I'd even pay a bit more to buy my car from company directly.
ericd 12y ago
My understanding is that these laws were put into place so that the manufacturers couldn't have it both ways - they couldn't enjoy the low startup-capital requirements of the franchise model, and then after using the franchisees to grow and scout out the best spots, cherrypick the most lucrative spots for manufacturer owned dealerships, driving out the independent dealerships by using their lower end-to-end costs. Because the franchisees are usually completely at the mercy of their chosen brand. The perversion of the law is that Tesla has never had franchisees, and they're still being blocked by the laws in many states, contrary to the original intention. I hate buying from dealers as much as anyone, but the law as I understand it makes some sense. I'm sure it varies from state to state and doesn't make sense in some.
- maratd 12y ago
  > and then after using the franchisees to grow and scout out the best spots, cherrypick the most lucrative spots for manufacturer owned dealerships This is easily resolved on the contract level. Knowing this, nobody with half a brain would start a franchise unless the parent company guaranteed the territory. That's how it works in virtually every other franchising market.
  - brc 12y ago
    Yes, this seems like a well-solved problem as nearly every franchising model includes company-owned stores.
  - ericd 12y ago
    Good point.
andrewtbham 12y ago
Perhaps I didn't make myself clear. Yes, that is my point, they fear consumers dealing directly with the auto manufacturers. If they dealt directly with manufacturers, it is implicit they would use a fixed price model like Tesla. That's what I mean by "undercut." Currently Most people don't pay the same price. The price you pay depends on how much the sales person can wrangle out of you. A fixed price from the manufacturer threatens the jobs and livelihood of car salesmen. I am not defending the auto dealers. I am a Tesla stock holder. I am merely pointing out their enemy's position. This is part of why the limit on the # of stores puts the dealerships at ease.

by maratd 12y ago

pcurve 12y ago

exactly. You don't see LG, Samsung, GE Appliances, Kenmore anxious to setup their own retail fronts because retail buying experience and cost structure of that model make financial sense for everybody involved. The current franchise model serves dealers well, but it really shortchanges customers, to the point that I'd even pay a bit more to buy my car from company directly.

ericd 12y ago

My understanding is that these laws were put into place so that the manufacturers couldn't have it both ways - they couldn't enjoy the low startup-capital requirements of the franchise model, and then after using the franchisees to grow and scout out the best spots, cherrypick the most lucrative spots for manufacturer owned dealerships, driving out the independent dealerships by using their lower end-to-end costs. Because the franchisees are usually completely at the mercy of their chosen brand. The perversion of the law is that Tesla has never had franchisees, and they're still being blocked by the laws in many states, contrary to the original intention. I hate buying from dealers as much as anyone, but the law as I understand it makes some sense. I'm sure it varies from state to state and doesn't make sense in some.

maratd 12y ago
> and then after using the franchisees to grow and scout out the best spots, cherrypick the most lucrative spots for manufacturer owned dealerships This is easily resolved on the contract level. Knowing this, nobody with half a brain would start a franchise unless the parent company guaranteed the territory. That's how it works in virtually every other franchising market.
- brc 12y ago
  Yes, this seems like a well-solved problem as nearly every franchising model includes company-owned stores.
- ericd 12y ago
  Good point.

andrewtbham 12y ago

Perhaps I didn't make myself clear. Yes, that is my point, they fear consumers dealing directly with the auto manufacturers. If they dealt directly with manufacturers, it is implicit they would use a fixed price model like Tesla. That's what I mean by "undercut." Currently Most people don't pay the same price. The price you pay depends on how much the sales person can wrangle out of you. A fixed price from the manufacturer threatens the jobs and livelihood of car salesmen. I am not defending the auto dealers. I am a Tesla stock holder. I am merely pointing out their enemy's position. This is part of why the limit on the # of stores puts the dealerships at ease.