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Kill the laws that keep car dealers in business

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Re: Kill the laws that keep car dealers in business

#71

Post by MrFoof »

venning wrote: post #37

I paused my software development career to sell cars for a year. I sold cars at two different Honda dealerships, both owned by Fortune 500 companies in, what I believe is, the densest single market for Hondas in the US (Metro DC). There's a couple things missing from the situation as described by the author. First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. Used…

>First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers.

This is essentially the case on all volume mainstream manufacturers. Hyundai/Kia, Toyota/Scion, Honda, Nissan, Mazda, Ford, Chevrolet, Dodge/Chrysler all fall in this bucket in the United States. The exception to this being trucks (RAM, GMC and Chevy Silverado, Ford F-Series).

Where money is actually made on sales are in the luxury segment. However, who is really making the good money has become interesting over the years. Lexus, Acura, and Cadillac margins are fine, but the Europeans have better margins still, though there's still a chasm between everyone and the VW Group.

Rolls-Royce aside, BMW only has Mini which has been little more than break-even since its relaunch. Moreover, there are slimmer margins on the 1/2-series since they serve as conquest cars. The same goes for Mercedes-Benz with SMART, and the CLA/GLA being their (very aggressively positioned) conquest vehicles. For mainstream luxury brands, Audi has some of the highest gross margins at 10%. Yet their ultra-luxury brands -- Bentley, Lamborghini, and most importantly Porsche -- is where the real money is made (at least on a per-unit basis). I struggle to think of the last time (since their return to form 10-15 years ago) where Porsche's gross margins were under 20%. Porsche prints money.

Sorry for not taking JLR into account, as they're still restructuring. Infiniti is excluded because Ghosn has nearly killed the brand twice. As for Tesla, I've been saying for years that they were more likely to model themselves more after Porsche than Honda/Toyota, as that's where the real money is for a still growing company. When the Model X pricing was announced, that was all but confirmed.

Re: Kill the laws that keep car dealers in business

#72

Post by dexterdog »

gambiting wrote: post #47
jpfr wrote: post #18

Earlier quoted context omitted.

In Europe, only used cars are sold directly off the parking lot or showroom of the dealer. Normally, you choose the options (color, engine options, leather seats, ..) and the car is built for you. You can pick it up some weeks/months later. Manufacturers of high-priced cars may invite you to pick up the car at the plant when it comes off the line. They have a special "experience" designed around that.

In "Europe"....again you are trying to make it sound like everywhere is the same. I've bought many new cars in "Europe" and it was always off the lot. I'm really not interested in waiting 5-6 months for a new car. Especially since waiting time for some, like the new Range Rover is 12-18 months, which is just insane. If you don't have a car in stock, I'm walking out of the dealership.

Then you should be willing to pay for inventory and overstock. I find that to be a waste. Then again I'm the kind of person who when the time comes can likely find a car that I will be fine with from a selection of a dozen. I'm also fine with waiting for a month or so.

Re: Kill the laws that keep car dealers in business

#73

Post by rtehfm »

joosters wrote: post #61

"Don’t ever take a fence down until you know the reason why it was put up" You can't write a balanced article on car dealerships without researching why these laws were enacted in the first place. So many people here just assume "oh, it's because of greed" - but perhaps you should spend a short time first of all investigating why these laws were created and the problems they were trying to solve. Likewise, you can't…

There are several, really good discussions on this topic as well as the issues with the current state of the auto suppliers and their agreements with automakers that stifle progress in development. Unfortunately, I was only able to find one of them (linked below).

https://news.ycombinator.com/item?id=5819825

Re: Kill the laws that keep car dealers in business

#74

Post by tim333 »

petriw wrote: post #36
bgribble wrote: post #15

Earlier quoted context omitted.

This works great if you don't mind cutting down the number of car models a whole lot. Factories are reconfigured multiple times a year to make different models and there's weeks of downtime between manufacturing runs. It might be months before there's a factory that is ready to make a lower-volume model.

In Sweden where I live popular configurations fitting specific price brackets are kept in stock. Custom configurations on the other hand can take weeks or months to get from the factory to Sweden. Those who know what they want pre-order a car so that it's delivered when they want to replace their current car, which is usually every 3 years. I bet Dell still keeps an inventory, it's just a vastly reduced one.

Also building a computer in terms of clipping in various cards etc is a lot quicker than building a car.

Re: Kill the laws that keep car dealers in business

#75

Post by dexterdog »

qq66 wrote: post #5
BinaryIdiot wrote: post #4

Earlier quoted context omitted.

If you're selling me something very big and expensive I better get a chance to look at it up close and try it out. If you're going to charge me for that experience then I will go somewhere else. What should happen is the car manufacturers buy out the best dealerships and simply sell the cars direct. It'll allow them to optimize their distribution and inventory channels and give them a bigger margin overall. It's goin…

The car manufacturers actually lobbied for laws that prevent them from cutting out dealerships, to remove barriers to entrepreneurs investing in building brand-exclusive dealerships. The dealerships wouldn't have been built without these laws protecting them, that's why the manufacturers lobbied for them. The legal system in place was a precondition for the development existing American car dealership network, and I…

Sounds like the same kind of nonsense that came with taxis.

Re: Kill the laws that keep car dealers in business

#76

Post by jpatokal »

jasonkester wrote: post #48
jpatokal wrote: post #35

Earlier quoted context omitted.

> Negotiate with the manufacturers to handle direct-to-consumer sales for them. As in, found a startup and then negotiate with Ford, GM, Toyota, Volkswagen etc about a deal that's guaranteed to piss off the existing dealer networks that make ~100% of their revenue and will view this as an existential threat? Good luck with that! Above all, this seems to assume car companies are stupid. Ford, GM & co would sell their…

Thus the billions of dollars of VC and fighting mentioned above. In the context of what you've written, though, can you explain why Tesla chooses to sell directly to consumers? They have the ability to sell through dealers, just like the established automakers. And it would cost them a lot less money and hassle to do so. Why then would they choose to sell direct if not that it actually made good business sense to do…

Because Tesla is starting from scratch and doesn't have an established dealership network to worry about disrupting. The PR angle and having full control over the experience also helps (see also: Apple Store).

And like Apple -- on second thought, much more so than Apple -- they're a niche producer and can cover a good chunk of their potential customers with only a few stores. For example, here in Australia, they've got two (2) stores for a market of 20+ million, consisting of one each in Sydney and Melbourne, while (eg.) Toyota has 36 dealerships in Melbourne alone.

Re: Kill the laws that keep car dealers in business

#77

Post by robzyb »

khgvljhkb wrote: post #51
jpfr wrote: post #18

Earlier quoted context omitted.

In Europe, only used cars are sold directly off the parking lot or showroom of the dealer. Normally, you choose the options (color, engine options, leather seats, ..) and the car is built for you. You can pick it up some weeks/months later. Manufacturers of high-priced cars may invite you to pick up the car at the plant when it comes off the line. They have a special "experience" designed around that.

Europe seems like an interesting country indeed. In many countries on the continent we call Europe, it works differently. I'm in a european country, and next-door to my office is a Porsche dealership where new cars roll out daily, filled with young men satisfied they used their whole bonus.

> I'm in a european country, and next-door to my office is a Porsche dealership where new cars roll out daily, filled with young men satisfied they used their whole bonus.

Why do you think that they didnt order it a few weeks/months ago?

Re: Kill the laws that keep car dealers in business

#78

Post by nothrabannosir »

joosters wrote: post #61

"Don’t ever take a fence down until you know the reason why it was put up" You can't write a balanced article on car dealerships without researching why these laws were enacted in the first place. So many people here just assume "oh, it's because of greed" - but perhaps you should spend a short time first of all investigating why these laws were created and the problems they were trying to solve. Likewise, you can't…

"Don’t ever take a fence down until you know the reason why it was put up"

This is the most frustrating thing about uncommented sleep() calls sprinkled through a codebase.

Re: Kill the laws that keep car dealers in business

#79

Post by cjrp »

khgvljhkb wrote: post #51
jpfr wrote: post #18

Earlier quoted context omitted.

In Europe, only used cars are sold directly off the parking lot or showroom of the dealer. Normally, you choose the options (color, engine options, leather seats, ..) and the car is built for you. You can pick it up some weeks/months later. Manufacturers of high-priced cars may invite you to pick up the car at the plant when it comes off the line. They have a special "experience" designed around that.

Europe seems like an interesting country indeed. In many countries on the continent we call Europe, it works differently. I'm in a european country, and next-door to my office is a Porsche dealership where new cars roll out daily, filled with young men satisfied they used their whole bonus.

Chances are they ordered those cars several weeks/months before.

Re: Kill the laws that keep car dealers in business

#80

Post by Spooky23 »

joosters wrote: post #61

"Don’t ever take a fence down until you know the reason why it was put up" You can't write a balanced article on car dealerships without researching why these laws were enacted in the first place. So many people here just assume "oh, it's because of greed" - but perhaps you should spend a short time first of all investigating why these laws were created and the problems they were trying to solve. Likewise, you can't…

That's very logical. But the en vogue approach today is to disrupt everyone out of business because technology entrepreneurs and capitalists are "good guys".

The argument for this stuff is mostly "OMG Tesla is awesome!". But folks forget/ignore that having to deal with A fortune 50 company as a consumer isn't fun either (recall: AT&T in the old days). Your local car dealer may have annoying commercials, but the folks who allowed a defective $0.50 ignition switch to kill people didn't work for a Chevy dealer... They were GM engineers.

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