> To auto industry veterans, the company’s jaw-dropping achievement isn’t popularizing electric cars. That may have been inevitable as the consequences of climate change began to hit Americans.
I find this so fascinating. I think there comes a point where an achievement is so monumental, that people stop comprehending it as a person's achievement and instead view it as a historical event. Then the achievement becomes "inevitable", because it was the march of history pushing the achievement forward.
Being the CEO of a successful car company is an achievement. But revolutionizing the car industry itself is "inevitable".
I’m not sure what planet the author is living on. 70 years of oligopoly would suggest otherwise. Seat belts, safety glass and steering columns that don’t harpoon the driver may have been inevitable as the consequences of dying in minor crashes began to hurt Americans, but it sure took a lot of dedicated people like Ralph Nader to make it so.
I think the argument is which perspective you take. From the internal observe perspective, you actually have to do the thing for the thing to get done. Yes you need individuals.
If you take an external observer perspective that collectively internal and external pressures cause individuals with talent and drive to go and tackle that problem.
For example, even if you personally did absolutely nothing, Apple will still collectively create some new fangled device with new features, new performance etc etc. That’s literally true of every human endeavor - no person is doing it alone regardless of how pivotal they may seem. So then the question is “how pivotal is Musk personally”. Certainly Tesla existed outside of him but I think his accomplishment there was to make EV cars sexy and grow that industry from nothing despite headwinds. Would it have happened without him? Not sure. I’m not as bullish as the author given how Tesla really was a motivating force for them to get the show on the road and government regulations in the space are a joke (vs what is actually needed) and even still manufacturers are dragging their feet.
So I think the author is right that “it would have happened anyway” but wrong about the scale of the specific impact Musk has had through Tesla.
What made EV-as-an-industry financially feasible is the advancement in lithium battery technology, which by itself is fueled by the growth of the smart device industry. It's the parts that were changed, not the design of EV. Any details in today's EV design is optimization made for the sake of competition, and have nothing to do with the modern form-factor, if there's any. (It's still the same motor-connected-to-battery from (probably) early 1900s.)
The actual achievement should look like how Apple nailed the modern smartphone form-factor. Hardware-wise, LG did it first with their Prada phone, but Apple polished it with matching software and UX. Even though each component was already explored by others, Apple still had to come up with a working combination. That's an achievement.
Anyways, back to Tesla. Tesla didn't really achieve anything about EV. The real achievement of Tesla is car-as-smart-platform (which engulfs the entirety of self-driving). AFAIK, this is difficult on ICE cars due to mechanical and business reasons, but Telsa could avoid them by building on EV. Now this is a real new thing. IIRC, this is also what Elon has always been emphasizing. It's more than just an EV company.
I don't particularly like tesla, much less musk, but this just seems like a win-win. Dealerships are a middleman much more deserving to be ruthlessly demolished by "tech disruption" than, say, journalism. It's fascinating, and frankly suspicious, that they're still in business and thriving, given their value proposition in today's world.
What's so bad about American dealerships? Here in Europe I've never heard anyone complain about them. They just provide a service - they have cars available to test drive and have a real person to talk to during the purchase. Sure, the owners make profit, but they DO provide value for the customer and they're at mercy of the car company, which means, in bad economic times, they can get squeezed pretty hard. How is it different in the US?
I’ve bought vehicles at both US and EU dealerships; the EU sales process was; they showed me the vehicle I had seen on their website, we drove the car, then we haggled a bit and signed contracts. US sales process was much more akin to how I imagine time share sales scams work - when you think you’re done, the gauntlet of high pressure multiple-rooms-with-increasingly-“senior”-managers has just started.
It took nearly two hours of people telling me I was an idiot for not taking the extended leather steering wheel warranty etc before getting out of there.
Both of these experiences were at official Hyundai dealerships.
Whether they provide value is kind of irrelevant, because one (at least in the US) _has_ to go through them. Is their markup equal to the value they provide? We'll never know, because we can't choose to not go through them.
If I want to place an order for a vehicle (not buy one off their lot), the dealer does nothing but still makes a cut.
Not to mention, the majority of folks selling cars (even new cars) are some of the slimiest you'll meet. They are masters of manipulation.
P.s. example of manipulation: some years back I bought a used Honda Civic. The 4th person I got passed to made sure to tell me "the civic is the most stolen car in the US", while trying to sell me on some aftermarket alarm system. I of course knew this was an intentionally misleading statistic, but I'm sure many folks could fall for it.
Dealerships in the US make a lot of money by convincing people to take bad deals. They're known for being sleezy and exploitative by default, as the model encourages that.
A lot of people want to be able to buy a car the way they buy almost any other consumer product: easily, for a set price they can research ahead of time. Dealerships stand in the way of that.
American dealerships(only ones I’ve dealt with) make a lot of their money on the auxiliary purchases, so they keep you in rooms, passing you around managers to try to get you to buy these things(extended warranties, extra options, tire changes, yadda yadda). They are also pretty difficult to negotiate with.
The service they offer is convenience and possibly peace of mind(over an owner sale), but they sure do take an arm and a leg for it.
I bought a car last year during the covid induced car shortages. The first visit to the dealer, I said what I wanted, he went to the back and got a piece of paper with a price and a VIN number, the price matched what the Toyota website said, and I agreed to put down a deposit. The next visit 3 weeks later, I saw the car I was promised, the dealer told me the price which matched the sheet. He gave me the keys for a totally private test drive (he didn’t even come along) and I proceeded to hand over the check and was sent on my way as soon as the DMV paperwork was fulfilled. It was a Toyota dealership in California. They’re not all rotten. I’d happy buy another car from the same salesperson if I was in the market. If I had to guess, dealerships that do fleet sales have less pressure and can treat normal consumers with proper respect.
One thing that keeps European dealerships a pleasurable experience is that they have to compete with direct sales. I can just go on Volkswagen's website, configure the car I want and have it delivered. That means dealerships have to provide value to stay in business. In the US you don't have direct sales (except for Tesla), so even if dealerships provide negative value they still stay in business, as long as all of them provide about the same amount of (negative) value.
My dealership tried to sell me tires at $300/each. At a tire shop I got comparable tires for about 60% of that.
Dealerships make a lot of money via convenience (you’re already here for your 30k service) and just plain ignorance (most people have no idea what makes their car work or what repair cost is fair).
There was an Adam Ruins Everything episode about car dealerships in the US, from what I remember US lawmakers have made it so it's not a free market compared to the EU. I think it's similar to how US ISPs maintain monopolies in certain areas.
Here (in EU) we have anything from manufacturer-led dealership to entirely independent one.
But there laws that make it basically forbidden for manufacturers to sell directly and have a lot of protection for dealerships business. Hence no competition. That was made into slapping extra price over MSRP on rarer cars there. That practice started spanning pretty much all cars during pandemic.
Dealership in Europe is not so good either. Real example: I bought a motorcycle from one of the 2 dealers in the country. I had to do the first oil change at the dealership in order not to lose the warranty (in my country, in US you can change the oil at home). They charged 100 EUR for an oil change, including 1h hour of workmanship, when it took less than 15 minutes from parking in front of the dealership to leaving the building with the work done and paperwork complete.
For a car, the oil change was 300 EUR at the dealership, same problem with losing the warranty. In that case it took one hour - no idea why because it takes just 10 minutes of actual work and there was no wait time to cool the engine and oil, they were almost cold.
They are middlemen adding very limited value. It's not nothing; but maybe also not the thousands of dollars of a cut that they take. The fact that they need protectionist measures like state legislation to prevent competition that simply cuts out the middle man, kind of proves that. It's more of a tax than a value add.
Tesla organizes test drives too. And you can bring your Tesla in for maintenance (well not in these states obviously). So, it's not like you don't get any service.
It's the protectionism that is bad. Without it, more manufacturers would cut out the middle man and sell directly. Because why give that big of a cut to a middle man you don't need?
They only exist because it's illegal to do business directly with the consumer. Had they been needed by the customer, they wouldn't fight tooth and nail to keep those laws
In general dealers are relentless in maximizing their profit on each deal and turn the negotiation into an all-day grind of dealing with overpriced unnecessary add-ons and inflated financing rates. Dealer employees are not employed by the OEM so they don’t care how much damage they do to the OEM’s brand with their tactics.
They don't have to compete against the factory to make sales, so they just have to compete with other middlemen selling the same commodity, which is a great situation for an anti-consumer cartel to form.
Bought two cars, brand new. Never again. Dealers are abusive, scammy and inconsiderate. It’s such an arduous process that I dread the next car purchase coming up for my wife in next two years.
Is the idea of making a car then selling it directly to someone who wants it so strange?
There is some serious pretzel-thinking going on here somewhere in the halls of power (pretzled, one assumes, by careful application of money). The idea that there needs to be a middle-man is weird. The people who want one less layer of abstraction don't need to justify themselves, the dealers have to be doing a lot more than being not-so-bad to justify a mandatory role in the process.
> "The big achievement, instead, was making direct-to-consumer car sales possible."
This isn't the biggest problem America faces, but the idea of a business needing to "innovate" to sell its product to consumers has to be the most unAmerican sentences I've read in an article. It is hard to get a more petty strike in against capitalism.
Maybe it is not very relevant today but car dealers offer a range of service unrelated to building cars, such as dealing with vehicle registration, insurance and financing.
In the case of Tesla, it is more accurate to say that they are their own dealer since they provide services like financing and registration. They even have their own insurance. Of course, these services are not free, and neither are test drives and showrooms, they are included in the price of the car.
The difference with the traditional dealership model is that they only sell Teslas, and that they don't want other dealers to sell Teslas. In a sense, they are anticompetitive.
Yes, I am playing devil's advocate here, but that's to say there is a reason for this dealership law.
> dealing with vehicle registration, insurance and financing.
Isn't this just more middlemen they set you up with, and government bureaucracy that ought to be self-evident?
From what I hear the average dealership is about the worst option, the typical sales swindle of information asymmetry and other adversarial games? I mean, it's basically right there in the name.
>Dealerships are a middleman much more deserving to be ruthlessly demolished by "tech disruption" than, say, journalism
Why are you inserting a moral position here? The world economy runs on middle men. I know of no-one that goes to the local ore mine to build their own car. The industry is literally built on middle men.
If you want to make the argument that there are laws protecting their middle man position that are now out dated that's one thing, but absent that they are obviously providing a service people find valuable.
That's not a middleman. A middleman buys and sells the exact same product. In this case, the steel mill buys ore from the mine, turns it into steel, and sells it to the car company. The "turns it into steel" part is what differentiates them from a middleman.
If there's anything Tesla seems to have proven, it's that dealerships are actually good (or at least better) for the customer. Tesla customers are a captive audience wholly dependent on a startup with no customer service. Non-Tesla customers have virtually infinite options, and someone to actually take care of them. I suggest you read even the most die-hard Tesla fansites and see just how bad Tesla's anti-dealership strategy is for the customer.
> Non-Tesla customers have virtually infinite options, and someone to actually take care of them.
This conflates dealerships with the ability/right to repair. I think dealerships are absolute scum but am completely on-board with enabling 3rd party mechanics to repair vehicles.
Dealerships don’t even ensure you don’t have the same vendor lock-in issues (getting modern ICE foreign cars repaired in small cities/towns can be a nightmare).
I own a Tesla and have had no problems with customer service.
What I do have a problem with is negotiating a price for a vehicle from a slimy dealership agent who have a litany of techniques to increase their profit for no good reason. On the Tesla website the price you pay is the price that everyone pays.
They are both anti-consumer. The regulatory solution is to break the dealers monopoly in selling cars in an area, but also force-open the repair, service and spares part markets which most car manufactures use as profit centers. I don't know the Tesla situation specifically, but some companies use extremely dodgy techniques, like voiding your entire warranty for getting oil changes outside their networks etc.
> Tesla customers are a captive audience wholly dependent on a startup with no customer service.
People keep saying this but its just not true. Look at their growth in terms of service centers.
And their mobile service fleet is the largest in the US, and reduced the need to bring the car in. And their software capability allows for less trips due to software issue.
Of course their costumer service is not perfect, but given the growth they had its essentially impossible to keep up with customer service.
If you look at other car startups, dealerships also don't fall out of the clear blue sky. Had Telsa built with dealerships they very likely would have had very similar growth problems in terms of service capacity.
> Non-Tesla customers have virtually infinite options, and someone to actually take care of them. I suggest you read even the most die-hard Tesla fansites and see just how bad Tesla's anti-dealership strategy is for the customer.
Only browsing forums where people specifically to complain is selection bias.
And you can find forums like this for lots of dealerships and car companies.
They hold inventory. That's a massive benefit to both the consumer and the manufacturer. Even if you dismiss everything else they provide (which would be unwise), that itself is enough to justify their existence.
Inventory. Good point. Brands use dealerships as captive clients of their new cars. Then they can claim that had "sell" X cars of this model yet, when in fact are pushing dealerships to buy a percentage of those cars as requisite to keep the brand image.
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.
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.
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.
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."
The whole ecosystem for car sales in the US is rigged, and not just dealerships.
I had a surplus car, researched “fair market” value for private sale versus selling it to a dealership. I was closing up an estate, getting rid of it easily, but fairly was the goal.
It was a 2013 Subaru Impreza with 149,000 miles that I’d have to clean up for sale to a private party, I opted to unload it as a sale to a dealer. Trade in value quoted at three sites (kbb, edmunds, carfax) was $3500. Private party sale was $4100, retail sale that a buyer would pay at a dealer $5200.
Dealer puts new tires on it lists for $9999 and suddenly the three sites list “fair market” retail at $11,000, trade in at $7000 and private party at $9000.
Same VIN entered, same mileage, suddenly the car on the lot is worth more when owned by a dealership according to KBB, Edmunds and Carfax.
This is normal. You buy a car from a guy on the street, it could break on the drive home and you’re mostly shit outta luck. Even if you have a legal claim (and you usually don’t since the sale is as-is), it’s not worth the trouble and they’re likely to be judgment proof.
On the other hand, dealers usually include a warranty of some kind with their “certified pre-owned” vehicles. And as repeat players, they have a reputation to keep. The manufacturer also imposes further rules on them to protect the car brand.
Fwiw, I strongly oppose laws that protect the dealership business. But this specific thing you’ve noticed is not some grand conspiracy (how would that work anyway?). It’s just rational consumer behavior.
It's highly unlikely that's a car with 150k miles gets listed as a CPO. And, regardless, that should not affect the market price of the vehicle in general for private sale / trade in.
> You buy a car from a guy on the street, it could break on the drive home and you’re mostly shit outta luck.
Then why did the private party value double overnight?
That doesn't quite seem responsive to your parent comment. They recognize that the dealer price is higher.
What's weird is that every price jumped after selling the car to a dealer, not that the retail price was higher than the trade-in price.
> Trade in value quoted at three sites (kbb, edmunds, carfax) was $3500. Private party sale was $4100, retail sale that a buyer would pay at a dealer $5200.
> Dealer puts new tires on it lists for $9999 and suddenly the three sites list “fair market” retail at $11,000, trade in at $7000 and private party at $9000.
I tried that 'buy from a man on the street' thing a couple of times. Young, wasn't spending much anyway. I was fairly experienced at spotting the easy problems. Both times I bought someone else's well-hidden problem. One lasted a year, one a month. Friends, then dealers (with a warranty).
It sounds like those websites didn't have much data to analyze to determine the price, and the dealer had better market info, and then the websites scraped the dealer's listing and used the dealer's listing in their models which caused the website prices to change (because of the lack of previous data).
A friend of mine totalled my car while I was on vacation, not at fault, and my insurance company used these sites to lowball me. Being a used car, about 10 years old at the time, there were very few comparable vehicles for sale in my area. The insurance company wouldn't even accept one out of state. I dickered for a few weeks until I found one on Craigslist for $1k over the offering price -- I called my adjuster immediately, and he was happy to pay it out and never hear from me again.
If you actually want a fair price on a trade-in, you'll need to sell it on commission. Less parking, advertising, and expenses to get it into saleable shape -- and you don't get the money upfront while you're trying to whittle down your loan. If you want to just walk away from the car and deduct it from your purchase, you pay dearly for that convenience.
Your example is a bit of extreme but dealers can fix up a car in ways that’s not affordable to us. I’ve seen cars with paint chips and scratches come out looking brand new after a professional fixes it. Same with interior.
Again I highly doubt the dealer in your example did enough to double the price of the car. However I could see them adding a few thousand after their professionals fix and repair cosmetic issues. They usually have people on hand who can do these repairs correctly and cheaper than the retail price they would charge us to fix a single car.
They can also just send it off to a wholesale auction to get the cash out of it. Much less than what they'd list it for on the lot, but that's typically what they base their trade-in on. Especially on a car with 150k miles on it.
A firm fixed price is a key aspect of the free market delivering maximum benefits to the consumer. If you have an Econ 101 "perfect market" in a commodity with a large number of buyers and and a large number of sellers, then you end with a single price being the marginal cost of production. Every buyer willing to pay at least the marginal cost gets to do so at the marginal cost. The difference between marginal cost and the price a buyer is the consumer surplus. The difference between actual cost and marginal cost is the producer surplus. With few exceptions the consumer surplus is massively larger than the producer surplus.
Excuse the bad summary of micro-econ 100.
Cars aren't a commodity which is why there is the potential for a consumer win in negotiation, but it's slight.
It's like gambling against the house. The best ones make it feel like you've won at the same time they suck you dry. You think you got a good price at the dealership when you negotiated the price down, but any good salesman will leave you feeling that way.
Imagine if Apple wasn't allowed to sell Macbooks directly to consumers, and you had to go to an independent reseller instead. It's bizarre. How long can these laws last?
sounds good.....really good.....apple store sucks...the lines.... hahahaha...yeah no thanks. considering they only have base models now....what's the point.
>[In the only two stores, both in New Mexico,] under an agreement with the tribal government, Tesla will train tribal members to serve as service technicians.
I'm not entirely sure how California halfway regulates gambling on tribal land when Indian affairs fall under federal jurisdiction, and tribal lands are sovereign-ish, but definitely out of state control.
Readit News
I find this so fascinating. I think there comes a point where an achievement is so monumental, that people stop comprehending it as a person's achievement and instead view it as a historical event. Then the achievement becomes "inevitable", because it was the march of history pushing the achievement forward.
Being the CEO of a successful car company is an achievement. But revolutionizing the car industry itself is "inevitable".
If you take an external observer perspective that collectively internal and external pressures cause individuals with talent and drive to go and tackle that problem.
For example, even if you personally did absolutely nothing, Apple will still collectively create some new fangled device with new features, new performance etc etc. That’s literally true of every human endeavor - no person is doing it alone regardless of how pivotal they may seem. So then the question is “how pivotal is Musk personally”. Certainly Tesla existed outside of him but I think his accomplishment there was to make EV cars sexy and grow that industry from nothing despite headwinds. Would it have happened without him? Not sure. I’m not as bullish as the author given how Tesla really was a motivating force for them to get the show on the road and government regulations in the space are a joke (vs what is actually needed) and even still manufacturers are dragging their feet.
So I think the author is right that “it would have happened anyway” but wrong about the scale of the specific impact Musk has had through Tesla.
The actual achievement should look like how Apple nailed the modern smartphone form-factor. Hardware-wise, LG did it first with their Prada phone, but Apple polished it with matching software and UX. Even though each component was already explored by others, Apple still had to come up with a working combination. That's an achievement.
Anyways, back to Tesla. Tesla didn't really achieve anything about EV. The real achievement of Tesla is car-as-smart-platform (which engulfs the entirety of self-driving). AFAIK, this is difficult on ICE cars due to mechanical and business reasons, but Telsa could avoid them by building on EV. Now this is a real new thing. IIRC, this is also what Elon has always been emphasizing. It's more than just an EV company.
Dead Comment
It took nearly two hours of people telling me I was an idiot for not taking the extended leather steering wheel warranty etc before getting out of there.
Both of these experiences were at official Hyundai dealerships.
If I want to place an order for a vehicle (not buy one off their lot), the dealer does nothing but still makes a cut.
Not to mention, the majority of folks selling cars (even new cars) are some of the slimiest you'll meet. They are masters of manipulation.
This short NPR piece provides more information: https://www.npr.org/2022/11/09/1135633742/economists-hate-ca...
P.s. example of manipulation: some years back I bought a used Honda Civic. The 4th person I got passed to made sure to tell me "the civic is the most stolen car in the US", while trying to sell me on some aftermarket alarm system. I of course knew this was an intentionally misleading statistic, but I'm sure many folks could fall for it.
A lot of people want to be able to buy a car the way they buy almost any other consumer product: easily, for a set price they can research ahead of time. Dealerships stand in the way of that.
The service they offer is convenience and possibly peace of mind(over an owner sale), but they sure do take an arm and a leg for it.
Dealerships make a lot of money via convenience (you’re already here for your 30k service) and just plain ignorance (most people have no idea what makes their car work or what repair cost is fair).
Here (in EU) we have anything from manufacturer-led dealership to entirely independent one.
But there laws that make it basically forbidden for manufacturers to sell directly and have a lot of protection for dealerships business. Hence no competition. That was made into slapping extra price over MSRP on rarer cars there. That practice started spanning pretty much all cars during pandemic.
Here is one example
https://www.carscoops.com/2022/11/honda-dealerships-payment-...
> They just provide a service - they have cars available to test drive
... sometimes
> and have a real person to talk to during the purchase
That is almost always clueless about nitty gritty, and just wants to sell you the one they earn most money on.
For a car, the oil change was 300 EUR at the dealership, same problem with losing the warranty. In that case it took one hour - no idea why because it takes just 10 minutes of actual work and there was no wait time to cool the engine and oil, they were almost cold.
Tesla organizes test drives too. And you can bring your Tesla in for maintenance (well not in these states obviously). So, it's not like you don't get any service.
It's the protectionism that is bad. Without it, more manufacturers would cut out the middle man and sell directly. Because why give that big of a cut to a middle man you don't need?
There is some serious pretzel-thinking going on here somewhere in the halls of power (pretzled, one assumes, by careful application of money). The idea that there needs to be a middle-man is weird. The people who want one less layer of abstraction don't need to justify themselves, the dealers have to be doing a lot more than being not-so-bad to justify a mandatory role in the process.
> "The big achievement, instead, was making direct-to-consumer car sales possible."
This isn't the biggest problem America faces, but the idea of a business needing to "innovate" to sell its product to consumers has to be the most unAmerican sentences I've read in an article. It is hard to get a more petty strike in against capitalism.
In the case of Tesla, it is more accurate to say that they are their own dealer since they provide services like financing and registration. They even have their own insurance. Of course, these services are not free, and neither are test drives and showrooms, they are included in the price of the car.
The difference with the traditional dealership model is that they only sell Teslas, and that they don't want other dealers to sell Teslas. In a sense, they are anticompetitive.
Yes, I am playing devil's advocate here, but that's to say there is a reason for this dealership law.
Isn't this just more middlemen they set you up with, and government bureaucracy that ought to be self-evident?
From what I hear the average dealership is about the worst option, the typical sales swindle of information asymmetry and other adversarial games? I mean, it's basically right there in the name.
Granted, most of my knowledge is second hand..
Why are you inserting a moral position here? The world economy runs on middle men. I know of no-one that goes to the local ore mine to build their own car. The industry is literally built on middle men.
If you want to make the argument that there are laws protecting their middle man position that are now out dated that's one thing, but absent that they are obviously providing a service people find valuable.
> They had to work through dealerships as middlemen [...] largely as a way of spreading risk. [...] Those conditions are, arguably, gone today.
This conflates dealerships with the ability/right to repair. I think dealerships are absolute scum but am completely on-board with enabling 3rd party mechanics to repair vehicles.
Dealerships don’t even ensure you don’t have the same vendor lock-in issues (getting modern ICE foreign cars repaired in small cities/towns can be a nightmare).
I own a Tesla and have had no problems with customer service.
What I do have a problem with is negotiating a price for a vehicle from a slimy dealership agent who have a litany of techniques to increase their profit for no good reason. On the Tesla website the price you pay is the price that everyone pays.
People keep saying this but its just not true. Look at their growth in terms of service centers.
And their mobile service fleet is the largest in the US, and reduced the need to bring the car in. And their software capability allows for less trips due to software issue.
Of course their costumer service is not perfect, but given the growth they had its essentially impossible to keep up with customer service.
If you look at other car startups, dealerships also don't fall out of the clear blue sky. Had Telsa built with dealerships they very likely would have had very similar growth problems in terms of service capacity.
> Non-Tesla customers have virtually infinite options, and someone to actually take care of them. I suggest you read even the most die-hard Tesla fansites and see just how bad Tesla's anti-dealership strategy is for the customer.
Only browsing forums where people specifically to complain is selection bias.
And you can find forums like this for lots of dealerships and car companies.
Lol. Startup. That crutch is long gone. If you are worth more than Ford and Honda combined, there are no excuses.
https://www.youtube.com/watch?v=meHYBhcpdvQ
And on that subject.
What may be the best channel on youtube, amazingly well researched, written, shot, presented... and it's a(incredulous tone) motorcycle channel?!
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.
I had a surplus car, researched “fair market” value for private sale versus selling it to a dealership. I was closing up an estate, getting rid of it easily, but fairly was the goal.
It was a 2013 Subaru Impreza with 149,000 miles that I’d have to clean up for sale to a private party, I opted to unload it as a sale to a dealer. Trade in value quoted at three sites (kbb, edmunds, carfax) was $3500. Private party sale was $4100, retail sale that a buyer would pay at a dealer $5200.
Dealer puts new tires on it lists for $9999 and suddenly the three sites list “fair market” retail at $11,000, trade in at $7000 and private party at $9000.
Same VIN entered, same mileage, suddenly the car on the lot is worth more when owned by a dealership according to KBB, Edmunds and Carfax.
On the other hand, dealers usually include a warranty of some kind with their “certified pre-owned” vehicles. And as repeat players, they have a reputation to keep. The manufacturer also imposes further rules on them to protect the car brand.
Fwiw, I strongly oppose laws that protect the dealership business. But this specific thing you’ve noticed is not some grand conspiracy (how would that work anyway?). It’s just rational consumer behavior.
> You buy a car from a guy on the street, it could break on the drive home and you’re mostly shit outta luck.
Then why did the private party value double overnight?
What's weird is that every price jumped after selling the car to a dealer, not that the retail price was higher than the trade-in price.
> Trade in value quoted at three sites (kbb, edmunds, carfax) was $3500. Private party sale was $4100, retail sale that a buyer would pay at a dealer $5200.
> Dealer puts new tires on it lists for $9999 and suddenly the three sites list “fair market” retail at $11,000, trade in at $7000 and private party at $9000.
How much did the tires cost?
If you actually want a fair price on a trade-in, you'll need to sell it on commission. Less parking, advertising, and expenses to get it into saleable shape -- and you don't get the money upfront while you're trying to whittle down your loan. If you want to just walk away from the car and deduct it from your purchase, you pay dearly for that convenience.
Again I highly doubt the dealer in your example did enough to double the price of the car. However I could see them adding a few thousand after their professionals fix and repair cosmetic issues. They usually have people on hand who can do these repairs correctly and cheaper than the retail price they would charge us to fix a single car.
Excuse the bad summary of micro-econ 100.
Cars aren't a commodity which is why there is the potential for a consumer win in negotiation, but it's slight.
It's like gambling against the house. The best ones make it feel like you've won at the same time they suck you dry. You think you got a good price at the dealership when you negotiated the price down, but any good salesman will leave you feeling that way.
You forgot a few words there. I assume it's supposed to say:
>The difference between marginal cost and the price a buyer is [willing to pay] is the consumer surplus.
Eg when the buyer is willing to pay $30 for a box, but the box costs $25 then that's a $5 consumer surplus.
Did I understand it right or did you mean something else?
That's what he meant.
That might just work out well.
Dead Comment