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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

#131

Post by afarrell »

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…

Indeed, if working for a car dealership is as stressful as described, then that means that the institution of the car dealership deserves to fade into the dustbin of the market.

Re: Kill the laws that keep car dealers in business

#132

Post by venning »

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…

We often moan about the taxi industry, the hotel industry, or the dealer associations but, in doing so, we miss something very important. The players in that industry often existed for years or decades in a state of government-backed protection without realizing it. Taxi drivers didn't necessarily lobby for market restrictions; they took advantage of the oligopoly, sure, but not necessarily consciously.

If you live in a state of believing that the market is actually fair and others have an equal shot at participating in it, then someone else entering the market in defiance of the existing protections appears to be unfair.

It's hard to believe that you didn't enter into a job market and win a wage fairly. That, instead, you were unfairly advantaged by artificial pressures in that market much bigger and more entrenched than you.

Essentially, the incumbents have been lied to for years and, now that new logistical realities are changing the status quo, it is very hard for them to understand why this is happening. They think someone must be cheating.

---

To expand on joosters' analogy of taking a fence down elsewhere in this thread [1], it's not necessarily bad if we take the fence down, we just need to realize that doing so may have serious consequences in the near-term. Having such a strong, deep-rooted artificial pressure in a market so abruptly removed may result in a painful readjustment of the market that hurts a lot of people.

(My other comments weren't meant as a defense of dealers, only intended to elucidate their operations.)

[1] https://news.ycombinator.com/item?id=10463745

Re: Kill the laws that keep car dealers in business

#133

Post by fulafel »

venning wrote: post #65
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…

The following [1] is an article that explains a bit of the supposed corruption behind the franchise protection laws. It is from a very biased source (Mother Jones), but the underlying facts can be sourced from many places. Essentially, California pioneered the idea of protecting existing franchises from being cannibalized by the manufacturer that they were dependent on. But other states have taken the idea to an extr…

What makes you say MJ is very biased? I've been finding their articles pretty good and can't spot any links (or allegations thereof) to interest groups in https://en.wikipedia.org/wiki/Mother_Jones_%28magazine%29

Re: Kill the laws that keep car dealers in business

#134

Post by grandalf »

venning wrote: post #90
MrFoof wrote: post #71

Earlier quoted context omitted.

>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 sale…

From everything I've read about the industry for the last 15 years, this is all completely correct and serves to demonstrate why it's such a hard industry. Extremely high costs, low profit margins, fiendish competition, considerable regulation, and absolutely no guarantee that the new product you just invested billions in won't flop after you've done all the work.

True, but there are some low hanging fruit that have not been attempted yet... in the following areas:

Finance:

- why can't I rent a car for a month and if I like it sign up for a year or two or three? If I want to own it, why can't I just convert to a purchase? These options are not fluid and interchangeable which necessitates much more of a "sale" rather than a more flexible, value oriented approach. A manufacturer should always be willing to convert a purchased vehicle into a lease or rental again.

Inventory/Planning:

- trim levels are out of control and make inventory planning much worse. If the base model sells for $18K but is available in a $36K trim level, is it really the same car? Why not just keep it simple. Nobody wants the salesperson to exert pressure to make me buy some "touring package" that I don't care about just because that is what is on the lot.

Pricing/Selling:

Buying a car takes hours while you wait for the salesperson to try to sucker you into paying full MSRP and he/she pretends to be negotiating on your behalf with the manager, who writes with a marker on the sheet of paper the best price. This horrible practice is highly unpleasant for all involved. The dealer lobby prefers negotiated pricing over fixed price because it suckers poorly informed consumers (many of whom are elderly) into overpaying.

I'd like to walk into a dealership pre-approved for a loan and pick from among 3 or 4 exterior colors and be done with it in 10-20 minutes. Better yet I'd like to just order it online and have it delivered in a few weeks, or better yet (per the above suggestion) just rent it for a month on an impulse.

All this is probably a distraction though, since self-driving car tech will allow us to get by with a fraction of the number of cars on the road and likely few of us will choose to own a car in the traditional sense.

Re: Kill the laws that keep car dealers in business

#135

Post by Symmetry »

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…

Well, we can see how the dealership-less model works out for Tesla and if it causes major problems.

Re: Kill the laws that keep car dealers in business

#136

Post by throwaway7767 »

robzyb wrote: post #77
khgvljhkb wrote: post #51

Earlier quoted context omitted.

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?

Not the GP, but I can confirm the way GGP describes is not the case in all european countries.

Here dealers have inventory and sell from it. I know because we've had issues where people buy "new" cars that are in fact the previous years model that's been sitting in a warehouse for a while. This then causes confusion as they're first registered when they're sold, and the owner doesn't realise he has the older model.

Re: Kill the laws that keep car dealers in business

#137

Post by grandalf »

venning wrote: post #132
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…

We often moan about the taxi industry, the hotel industry, or the dealer associations but, in doing so, we miss something very important. The players in that industry often existed for years or decades in a state of government-backed protection without realizing it . Taxi drivers didn't necessarily lobby for market restrictions; they took advantage of the oligopoly, sure, but not necessarily consciously. If you live…

Car dealers are among the biggest "small business owner" donors to political campaigns in the US. The National Auto Dealers Association is a big part of most dealers' lives, and they know who is buttering their bread.

I mention this b/c I don't think it's a gradual accident... The dealers forced Ford to shut down factory stores in Oklahoma not too long ago. This is a turf battle.

Re: Kill the laws that keep car dealers in business

#138

Post by venning »

grandalf wrote: post #137
venning wrote: post #132

Earlier quoted context omitted.

We often moan about the taxi industry, the hotel industry, or the dealer associations but, in doing so, we miss something very important. The players in that industry often existed for years or decades in a state of government-backed protection without realizing it . Taxi drivers didn't necessarily lobby for market restrictions; they took advantage of the oligopoly, sure, but not necessarily consciously. If you live…

Car dealers are among the biggest "small business owner" donors to political campaigns in the US. The National Auto Dealers Association is a big part of most dealers' lives, and they know who is buttering their bread. I mention this b/c I don't think it's a gradual accident... The dealers forced Ford to shut down factory stores in Oklahoma not too long ago. This is a turf battle.

Absolutely. Regulatory capture is a real thing and a really bad thing. I'm certainly not defending the franchise protections. I would just like to be clear: people get hurt when we uproot the status quo quickly. That isn't to say we shouldn't do it. There aren't easy answers here, particularly for the legislators who have to make those decisions.

Re: Kill the laws that keep car dealers in business

#139

Post by bbarn »

gambiting wrote: post #50
adventured wrote: post #27

Earlier quoted context omitted.

It takes Toyota 16 to 18 hours or so from start to finish on a car, with around 35 total man hours of labor put into each. I think a custom vehicle ordered from a sales outlet, could be completed within 2 to 3 days, and shipped out, available to the customer within 7 to 10 days. It would require pushing manufacturing forward in numerous ways, and retooling the entire process of making a car for this business model, b…

Except that the factories are already booked out several months in advance. Manufacture of a car takes less than a day, delivery can be done within a week, but that doesn't help if the nearest available slot in the factory is 4 months away.

A problem that would be immediately solved if it meant losing direct to consumer sales...

Re: Kill the laws that keep car dealers in business

#140

Post by jameshart »

rlpb wrote: post #9
bgribble wrote: post #7

Yep, buying a car sucks. But this is one of the largest supply-chain operations in the world. The dealer franchise system and its legal framework have evolved over 100 years and are balanced pretty delicately. It can't just be refactored by waving a regulatory wand at it and hoping for the best. Cars will still have to be warehoused, delivered, serviced, and resold. Somebody has to buy your old junky trade-in. Somebo…

> Dealer protection laws are there because manufacturers have a long history of trying to steal from dealers, cheat them, and put them out of business at whim. That doesn't justify them. I thought the US is supposed to be anti-regulatory? Why didn't dealers handle this by becoming primarily multiple-manufacturer and thus able to switch to or favor a different manufacturer at whim?

Right. The historical reasons for these laws seems to be because the US is actually 50 competing state economies, and 49 of those states do not contain Detroit. Dealer protection laws are state protectionism.

The fact that states outside California did not go to war to save their local Best Buys when Apple started selling direct, or states other than Washington go to bat for their local Borders bookstores when Amazon appeared (though there has been some rejigging of state sales tax laws around that) suggests that if the same situation were to occur today, in a less regulatory minded era than the early 20th century, states might be less concerned about trying to prevent Michigan car companies from driving their local dealers out of business.

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