Kill the laws that keep car dealers in business • Hacker News Board

Re: Kill the laws that keep car dealers in business

#121

Post by 300bps » Wed, Oct 28, 2015, 12:58 PM UTC

Rumford wrote: post #115

There are some interesting comments in here about how tough the struggle is for car dealerships, but I don't think that necessarily justifies their existence or mitigates the point of this article. If what the dealerships do is valuable enough to the customer, they would exist even without the ban on direct sales. But I think we can all intuit that if the ban were lifted, buying a car would be a very different (and b…

I agree that the ban should be lifted. And I think car dealerships would survive without it.

I recently spent some time on many car companies' websites and navigating the options is extremely difficult. They use all their marketing jargon like sDrive vs. xDrive or 4MATIC or whatever else other nonsense. They don't explain well what any of them mean, and I was left googling the definitions of everything.

Then you get to being actually able to see the car with the various options that you're interested in. The article decries the fact that dealerships have "$100 billion of unsold dealer inventory" but that inventory has a purpose. Some people need a car right away and they aren't picky about it being the exact thing that they want. Some people want to actually see, feel and use the options they are considering.

So I'm against the government-sanctioned ban on direct sales but I think that car dealerships would serve a purpose and survive without it.

Re: Kill the laws that keep car dealers in business

#122

Post by larrydag » Wed, Oct 28, 2015, 12:58 PM UTC

chrisan wrote: post #25

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.

> They have a special "experience" designed around that. This can happen in the US too: http://www.chevrolet.com/bowling-green-assembly-plant.html

Been there to the Corvette plant. It's a wonderful tour. There is even a section of the plant where the owner of the car can help build the engine. They put a special plate on the engine with the name of the owner too.

Re: Kill the laws that keep car dealers in business

#123

Post by gnoway » Wed, Oct 28, 2015, 1:00 PM UTC

suneilp wrote: post #3

"the price of the cars that are sold needs to be high enough to cover the costs of building and storing the unsold ones." We shouldn't be having this problem anymore. It's a massive detriment to the economies of scale model. Most people don't need to buy a car overnight, which ironically is because they are so expensive. Keeping a small amount of cars for test driving and personal inspection is all that is needed. Th…

I think manufacturers are going in the opposite direction now, though.

When I bought my VW they had just recently (within past 2-3 years) changed to a packaged model for options where you had to buy options together, and packages were dependent on others in tiers. So e.g. if I wanted the xenon headlights or the 'kessy' keyless entry and start, I had to buy the option package with those, which I think also included an upgraded stereo system. This package required another option package full of other things I didn't want (sunroof, sat nav), so in short if I wanted fancy headlights I had to buy a whole slew of other things to get them. In the past I could have ordered those headlights separately. I ended up not getting any extra options.

I think what's going on is that they want to be able to forecast how much of each option they need, and they want to be able to turn around on a new car purchase quickly. If it was all custom, they either have to build it overseas and ship it - takes a long time - or they have to ship generic cars here and install the options somewhere else, like the dealership, where they have inventory and tooling and personnel costs issues. It's much easier to produce 1000 red cars with option package a and reduce choice for the customer, as long as they go for it.

Re: Kill the laws that keep car dealers in business

#124

Post by hexadec0079 » Wed, Oct 28, 2015, 1:01 PM UTC

SideburnsOfDoom wrote: post #55

jpfr wrote: post #38

Earlier quoted context omitted.

Assembly lines require a huge investment and cannot scale beyond their maximum capacity. So when a car turns out to be popular, the OEM (the brand that does final assembly) or one of the many suppliers might run into a huge backlog. That is most pronounced when orders spike after the introduction of a new model.

This has nothing to do with the colour and seats though. When "your" car finally rolls of the line to should take ... what? 1 working day to spray it the colour that you want and let the paint dry, an hour to bolt in your choice of seats and Cd/Mp3 player.

That is not how car production works. Paint is literally the second thing that occurs after a chassis and body panels are applied. But otherwise, the working time on a car from start to finish, including paint, is somewhere in the 10-20 hour range. Theoretically, your timeline could work but paint takes time to cure, then needs polish and interior features take a while, although CAN-BUS has certainly made the electronics easier.

Re: Kill the laws that keep car dealers in business

#125

Post by Rumford » Wed, Oct 28, 2015, 1:01 PM UTC

300bps wrote: post #121

Rumford wrote: post #115

There are some interesting comments in here about how tough the struggle is for car dealerships, but I don't think that necessarily justifies their existence or mitigates the point of this article. If what the dealerships do is valuable enough to the customer, they would exist even without the ban on direct sales. But I think we can all intuit that if the ban were lifted, buying a car would be a very different (and b…

I agree that the ban should be lifted. And I think car dealerships would survive without it. I recently spent some time on many car companies' websites and navigating the options is extremely difficult. They use all their marketing jargon like sDrive vs. xDrive or 4MATIC or whatever else other nonsense. They don't explain well what any of them mean, and I was left googling the definitions of everything. Then you get…

You're probably right. For example: Even though you can buy a Thinkpad directly from Lenovo, Best Buy still exists.

Re: Kill the laws that keep car dealers in business

#126

Post by twoodfin » Wed, Oct 28, 2015, 1:05 PM UTC

jasode wrote: post #68

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…

>A dealership inventory is controlled in such a way that area dealerships are forced to compete heavily with each other. In order to sell a car, you have to have a car on your lot. In order to have a car on your lot, you have to order it from Honda. Maybe Toyota does it differently from Honda but this is the way the Toyota dealership manager explained it to me: all the dealerships are grouped into a "region" such as…

You can imagine why a logistics guy like Tim Cook might look at this situation and get almost as excited as Jony Ive.

Re: Kill the laws that keep car dealers in business

#127

Post by TheCondor » Wed, Oct 28, 2015, 1:07 PM UTC

jasode wrote: post #68

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…

>A dealership inventory is controlled in such a way that area dealerships are forced to compete heavily with each other. In order to sell a car, you have to have a car on your lot. In order to have a car on your lot, you have to order it from Honda. Maybe Toyota does it differently from Honda but this is the way the Toyota dealership manager explained it to me: all the dealerships are grouped into a "region" such as…

The article misses the issue. New cars are very nearly sold direct, the dealer doesn't arbitrarily mark up prices, in fact I think some manufacturers prevent it. There is a fixed profit for the dealer, for the most part. The manufacturers go to fairly good lengths to get the cars people want to the dealers too and then they try to have an assortment of dealer customizations that can be done, like the dealer can change the stereo out and do things like that. It's just pure brand for the dealers, why they sell new cars is just to avoid being labeled a "used car dealer."

Service and used cars are the broken market, those subsidize new car sales. "Certified used cars" and such are almost always over paid for. If can be dramatic too, we tracked my wives old Subaru through from trade-in. They gave us about $2000, then the last we saw it it was still in the region (about 80 miles away in a smaller town) listed for just under $8000. It was very clean and needed a new head gasket, they may have done that, maybe not, that would have cost us about $2000 so it didn't cost them that. even if it did they were still asking 100% more and we don't know what price the eventual buyer negotiated.

The laws that protect the dealers may be a problem, it looks like most states just want to protect the big "local" businesses from the big corporations though. The used car market seems like it could really benefit from disruption though.

Re: Kill the laws that keep car dealers in business

#128

Post by hueving » Wed, Oct 28, 2015, 1:12 PM UTC

notjoedimaggio wrote: post #63

nomercy400 wrote: post #30

Earlier quoted context omitted.

Shouldn't you have a free market economy? Where a customer is able to choose between a dealer or a direct sale company? The customer is the one that should be able to choose between a cheaper price with a lower service, or a higher price with more service. The problem here is that companies want to provide the cheap alternative but aren't allowed to do so. If a dealer cannot compete with a direct sale company on pric…

I agree in theory, but the reality is that these companies made large investments under one set of legislation. If a society flips and completely changes the economic/legislative landscape under which companies operate, it creates a very unstable business environment and discourages capex especially. This would not be good for the long term economic health.

Laws change. Invested money by big corporations is not a valid reason to keep them. In fact it's pretty sad that this would even be a point of consideration.

Re: Kill the laws that keep car dealers in business

#129

Post by msandford » Wed, Oct 28, 2015, 1:12 PM UTC

Asbostos wrote: post #116

rch wrote: post #93

Earlier quoted context omitted.

I seem to recall that the laws were put in place, at least in part, to protect the dealers who were financing the manufactures, only to have the manufactures come in and sell directly once vehicles were ready.

I'd have thought a contract between the dealer and manufacturer would have solved that. Why don't other industries need laws to protect retailers from manufacturers?

Because the manufacturer can bankrupt any one dealer since the finances are so difference, one has billions and the other has (maybe) millions. And once the dealer is out of business coming up with the money to sue for breach is a lot harder.

There aren't a lot of other products that people are willing to travel for versus just buying at their local big-box like Target, Best Buy, etc. What other product category even comes close?

Re: Kill the laws that keep car dealers in business

#130

Post by arbitrage » Wed, Oct 28, 2015, 1:15 PM UTC

stepanhruda wrote: post #103

Spooky23 wrote: post #80

Earlier quoted context omitted.

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…

You just knocked a strawman down

Good thing this isn't a formal debate, or else he might lose points.