tesla's real impact - breaking the car dealer monopoly
#91
You have it completely wrong. It actually is more efficient to have a good supply of vehicles. Most car buyers do not know what they want, what they can afford etc etc. The larger supply, the better chance that a buyer comes into the dealer and finds a vehicle and then leaves with it. The shorter the transaction, the better. Not having the cars on the lot and making buyers wait for them is not at all efficient. Making a buyer of a car wait for it because it needs to come from the factory is not all a good idea.
Too much inventory or too little inventory is not efficient. You want to have the perfect supply. And the auto business calls in "Days on Hand" if I am correct.
Too much inventory or too little inventory is not efficient. You want to have the perfect supply. And the auto business calls in "Days on Hand" if I am correct.
It costs a lot to publish the order catalogs with all the different choices, and all the mix-and-match possibilities.
It costs a lot to give buyers the real choice in the showroom. The vehicles have to be warehoused. If the dealer has a large showroom, it costs a lot to heat, cool and keep the showroom clean. If the dealer also has a back lot, the cars there have to be secured from vandalism and theft, and have to be kept clean.
With just-in-time, lean manufacturing and sales, warehousing of product is minimized. Warehousing costs a lot of money because the product is sitting there and not making money.
#92
So correct me if I`m wrong, what you are saying is that there is a system already in place, setup by privately owned dealerships that I can purchase a special order car just like Tesla, and not pay sticker unlike Tesla who will make you pay sticker for any config vehicle.... interesting
#93
And there were many who would have happily told you this:
Lemme get this straight. You want to start up some sort of internet thingy where people take pictures of themselves and then post them online and then they...
What do you mean that you'll get people to write in a sentence that only has 140 characters in this online thingy called the internet? Who in this world communicates like that?
You want what??? You want private space flight and trips for tourists in outer space? Deliver private satellite payloads and stuff? Nonsense.
You can't have $99 airfares. Impossible.
Lemme get this straight. You want to start up some sort of internet thingy where people take pictures of themselves and then post them online and then they...
What do you mean that you'll get people to write in a sentence that only has 140 characters in this online thingy called the internet? Who in this world communicates like that?
You want what??? You want private space flight and trips for tourists in outer space? Deliver private satellite payloads and stuff? Nonsense.
You can't have $99 airfares. Impossible.
#94
Originally Posted by patgilm
The difference here is that in a couple of your examples the profit margins are sky high as it doesn't cost much to generate revenue just like software companies except there is a decent amount of R&D expenses to keep up with technology. Tesla has much higher margins than other manufacturers and they still operate in a loss position and they don't even have the legacy pension/health care expenses like other manufacturers. They also have leases that guarantee trade in value so hopefully for them the demand stays as high as it is now. If demand slows it could be tough for them but I don't see that happening anytime soon.
You could argue that Tesla has accepted big time government help too. But it wasn't Tesla that crashed in 2007, it was GM and Chrysler - too big to fail. Microsoft, Apple, Facebook, Twitter, Instagram etc, etc. Will they fail and ask for bailouts? Not likely. Somehow we make special provisions for history and now we demand special provisions for a dealer/retail/supply network.
#95
It is inefficient to give buyers a lot of choice because it is very costly to give buyers choices. That is why automakers have cut back on the options available.
It costs a lot to publish the order catalogs with all the different choices, and all the mix-and-match possibilities.
It costs a lot to give buyers the real choice in the showroom. The vehicles have to be warehoused. If the dealer has a large showroom, it costs a lot to heat, cool and keep the showroom clean. If the dealer also has a back lot, the cars there have to be secured from vandalism and theft, and have to be kept clean.
With just-in-time, lean manufacturing and sales, warehousing of product is minimized. Warehousing costs a lot of money because the product is sitting there and not making money.
It costs a lot to publish the order catalogs with all the different choices, and all the mix-and-match possibilities.
It costs a lot to give buyers the real choice in the showroom. The vehicles have to be warehoused. If the dealer has a large showroom, it costs a lot to heat, cool and keep the showroom clean. If the dealer also has a back lot, the cars there have to be secured from vandalism and theft, and have to be kept clean.
With just-in-time, lean manufacturing and sales, warehousing of product is minimized. Warehousing costs a lot of money because the product is sitting there and not making money.
#96
So correct me if I`m wrong, what you are saying is that there is a system already in place, setup by privately owned dealerships that I can purchase a special order car just like Tesla, and not pay sticker unlike Tesla who will make you pay sticker for any config vehicle.... interesting
I can't imagine anyone actually paying sticker for a car unless demand exceeds supply. And demand exceeding supply is rare for cars, since sticker is an artificially inflated price that builds in the cost of middlemen and negotiating room. I've even had a Lexus dealership offer me a discount, up front and completely unsolicited, for a car I was considering special ordering - which just goes to show that even salesmen/dealers know that no one actually pays sticker.
Last edited by gengar; 07-10-17 at 09:01 PM.
#97
Why are they not the same? How is it efficient to have $40k vehicles sitting around on a lot for months at a time. The dealer is paying for insurance, cleaning, financing, overhead, and all of that is built into the price of each car that every single customer is paying for. Cars would be cheaper without this inefficiency. Why cant i just put in an order myself straight to the maker like I'm buying something online.
Would it make sense for Best Buy to have 100 washing machines sitting in each of their stores waiting for someone to buy them? Or does it make sense to only have a display model and ship it from a central warehouse when someone orders it? Its even worse for cars that can have 100s or 1000s of possible different combinations of options and colors. Dealership model isnt there because its the most efficient its there because of state laws that make it illegal for consumers to buy directly from the factory.
Would it make sense for Best Buy to have 100 washing machines sitting in each of their stores waiting for someone to buy them? Or does it make sense to only have a display model and ship it from a central warehouse when someone orders it? Its even worse for cars that can have 100s or 1000s of possible different combinations of options and colors. Dealership model isnt there because its the most efficient its there because of state laws that make it illegal for consumers to buy directly from the factory.
#98
You're wording your question in an incredibly confusing way. Dealership sales are dealership sales - you can negotiate anything. It doesn't matter if it is a car on the lot or a car ordered to spec.
I can't imagine anyone actually paying sticker for a car unless demand exceeds supply. And demand exceeding supply is rare for cars, since sticker is an artificially inflated price that builds in the cost of middlemen and negotiating room. I've even had a Lexus dealership offer me a discount, up front and completely unsolicited, for a car I was considering special ordering - which just goes to show that even salesmen/dealers know that no one actually pays sticker.
I can't imagine anyone actually paying sticker for a car unless demand exceeds supply. And demand exceeding supply is rare for cars, since sticker is an artificially inflated price that builds in the cost of middlemen and negotiating room. I've even had a Lexus dealership offer me a discount, up front and completely unsolicited, for a car I was considering special ordering - which just goes to show that even salesmen/dealers know that no one actually pays sticker.
I think the idea here is that we all can agree on buying a car is grimy. Sleezy salesmen, bait and switch, size 1 font terms and conditions that no one reads, and of course wonderful fees like blinker fluid recycle fee.
The easiest way to avoid such a system is straightforward
Hold every dealership to the same exact fee structure. If its a legitimate $10 fee for DMV, make that standard across all dealerships.
Make adding accessories optional, opt in sort of
Make cost structure of a lease and finance clear.
Finally make salesman salaried then commission based. Guaranteed earnings is one less hassle for a salesman
Direct Sales is not the cure for dealership experiences, its primarily a way of a boutique automaker to appeal with their future customer base to make it seem like they are buying experience "revolutionary" and upscale like higher end outfits like bentley or mclaren
#99
Everyone loves to hate dealerships, but I never had a bad experience with new car dealers. You can also say that dealers are middlemen that work on commission, so they often go out of their way to provide great service. For instance, back in 2014 I urgently needed to get a new car for my daughter when she got in wreck during thanksgiving weekend - I emailed my salesman at like 1am, and he responded to me within 30 minutes, and made sure that the car would be ready for us by the end of weekend so she could go back to college.
And also dealers don't only sell cars, they also provide service, extended warranties, parts, loaners, etc. And its true not just for car, but for many other products as well. For example I buy apple products at Best Buy or Microcenter because they offer extended warranties/protection plans that cover more than Apple's Applecare.
And also dealers don't only sell cars, they also provide service, extended warranties, parts, loaners, etc. And its true not just for car, but for many other products as well. For example I buy apple products at Best Buy or Microcenter because they offer extended warranties/protection plans that cover more than Apple's Applecare.
#100
That's why your argument that dealers are the ones that reduce price is so wrong. The reality is that dealers pay the manufacturer far less than sticker for the cars those dealers sell. The only thing dealers can compete on is how little they add on to that price before selling to the end consumer. Once again, that's not meaningful competition.
Last edited by gengar; 07-11-17 at 12:41 PM.
#101
if dealerships are the most efficient way why are there state laws forbidding direct sales. That is the red flag right there that there is a better model. Dealers are only able to treat you like crap now because there is no competition. What other industry is like this? Oh wait other industries don't have laws forbidding direct sales.
yea its so efficient to have 100s of cars rotting on the lot, in every color and option combination possible, that take weeks or even months to sell. Guess what youre paying for all of that overhead. Where as I can skip all that BS and order what I want from the dealer like im buying something online. Dealers can still be there to provide service and warranty work, and facilitate a delivery. But its inefficient to store all these cars and have them sit there for a long time where it can be minimalized to a showroom....like other industries. All a region needs is one large central location to store the cars instead of every single damn dealer maintaining their own inventory
Gulf States Toyota is the huge distributor of toyotas and lexus down here in the south, why cant i buy from them if not directly from toyota themselves. All these middlemen keep escalating the costs. These laws are straight up protectionism for dealership franchises to protect them from manufacturers selling direct, guess who pays for this in the end, customers.
Cars on the lot is time efficient for a customer wanting a car now, but is it efficient for the entire system?
Gulf States Toyota is the huge distributor of toyotas and lexus down here in the south, why cant i buy from them if not directly from toyota themselves. All these middlemen keep escalating the costs. These laws are straight up protectionism for dealership franchises to protect them from manufacturers selling direct, guess who pays for this in the end, customers.
Cars on the lot is time efficient for a customer wanting a car now, but is it efficient for the entire system?
Last edited by 4TehNguyen; 07-11-17 at 06:36 AM.
#102
other industries don't have laws forbidding direct sales.
#103
if this dealership model is the most efficient, then why not get rid of this law prohibiting direct sales since it is clearly uneeded. What are they afraid of?
mental exercise. Why do you think new cars depreciate so much and how can dealers play huge number games with the price of the same car? I think a lot of this new car depreciation comes from the hidden costs the dealer has on top of new cars. Costs of which are non recoverable when selling used. It is incredibly hard to tell what a dealer is truly paying for the car through all these incentives, hold backs, and numbers BS. I wish the law allowed us to bypass this MSRP number game.
Yes i dont buy an appliance from samsung directly but does samsung play this MSRP numbers game on their products?
mental exercise. Why do you think new cars depreciate so much and how can dealers play huge number games with the price of the same car? I think a lot of this new car depreciation comes from the hidden costs the dealer has on top of new cars. Costs of which are non recoverable when selling used. It is incredibly hard to tell what a dealer is truly paying for the car through all these incentives, hold backs, and numbers BS. I wish the law allowed us to bypass this MSRP number game.
Yes i dont buy an appliance from samsung directly but does samsung play this MSRP numbers game on their products?
Last edited by 4TehNguyen; 07-11-17 at 07:01 AM.
#104
#105
if dealerships are the most efficient way why are there state laws forbidding direct sales. That is the red flag right there that there is a better model. Dealers are only able to treat you like crap now because there is no competition. What other industry is like this? Oh wait other industries don't have laws forbidding direct sales.
Because the manufacturer with a direct sales model will put the dealer out of business.