GM CEO Mary Barra on Tesla: 'We just want a level playing field'

[richkae]

GM is not Kodak. Do some research and you'll see that GM has significant efforts in electrification.

Kodak was the leader in digital photography. My first 2 digital cameras were Kodaks. They invested a lot in the technology. In an internal power struggle the very top intentionally chose to hinder their digital camera efforts to protect their film product cash cows.
GM is not Kodak yet. They have the advantage that the massive capital required in the auto industry will slow the change, and that bailouts will give them 3rd and 4th chances. They could very easily "go Kodak" in the end though.

 

[Doug_G]

Don't forget that Kodak invented much of the digital imaging technology that drove them out of business. One of their business divisions that survived - spun out as Truesense - manufactures CCD and CMOS image sensors (it is now part of ON Semiconductor).

That could be an interesting parallel. If you're going to invent a radical new technology, it's a good idea not to bet against it.

 

[qwk]

GM is not Kodak. Do some research and you'll see that GM has significant efforts in electrification. They're doing a lot of research and insourcing the component manufacturing. Volt 2.0's coming next year. At least wait until then.

Both went Bankrupt. Both worked on new tech, to not sell it because it would cannibalize the existing products. The only difference is one was bailed out, therefore still exists.

- - - Updated - - -

That could be an interesting parallel. If you're going to invent a radical new technology, it's a good idea not to bet against it.

History always repeats itself. Sad but true.

 

[Merrill]

I always bought foreign cars because I felt they were more fun and better looking. I do think GM and Ford have come a long way and need to continue to innovate. The Ford Fusion is probably the best vehicle Ford has ever made and looks nice. Having said all that the Tesla is the first car made in America that I have purchased in many years. I hope GM and Ford realize at some point what they need to do to stay competitive and when the Gen 3 gets produced that will be a game changer.

 

[ecarfan]

Since it is stuck with franchises, it understands that if Tesla or any other company scales and brings down costs they would have trouble competing because of the $2k dealership overhead.

Big auto's dealership problem is not the relatively small amount of markup that the dealers add to every new car sale, the problem is that the dealers don't want to sell EVs because they don't make money servicing them. So they steer prospects to ICEs because that's where the money is.

 

[richkae]

Big auto's dealership problem is not the relatively small amount of markup that the dealers add to every new car sale, the problem is that the dealers don't want to sell EVs because they don't make money servicing them. So they steer prospects to ICEs because that's where the money is.

The auto dealers in the united states made 5.5 billion dollars of PROFIT in 2013 on their service and parts departments.
PROFIT!
That is more than 4 times what they made selling new cars. Over the last 10 years, they actually lose money on average selling new cars and the vast majority of the profits come from service.

I will post this image again - directly from the NADA 2013 "State of the Industry Report" http://www.nada.org/NR/rdonlyres/1B512AC7-DCFC-472C-A854-6F5527931A2F/0/2013_NADA_Data_102113.pdf

 

[Duckjybe]

The following is a video and transcript of General Motors CEO Mary Barra addressing the Detroit Economic Club. She acknowledges certain Silicon Valley competition that needs to be beaten. It seems she sees the writing on the wall that EV's are the future. This is very good news for the EV market if she can go beyond the Volt and implement a long range full EV.

http://insideevs.com/general-motors-ceo-mary-barra-2016-chevrolet-volt-video/

 

[AudubonB]

Big auto's dealership problem is not the relatively small amount of markup that the dealers add to every new car sale, the problem is that the dealers don't want to sell EVs because they don't make money servicing them. So they steer prospects to ICEs because that's where the money is.

Is that the reason? If so, I confess I don't see the logic there, because I don't think that's a valid premise.

 

[CliffG]

... the problem is that the dealers don't want to sell EVs because they don't make money servicing them...

Agreed. And doesn't this therefore mean that they are promoting defective products so they can "provide" the needed service? Why isn't that the same as a racket, with the manufacturers complicit? From the wikipedia article:

Particularly, the potential problem may be caused by the same party that offers to solve it, although that fact may be concealed, with the specific intent to engender continual patronage for this party.

This makes me so depressed. (Yeah, yeah, I know - that's Just The Way It Is: Money Talks and BS walks. I just had to vent.)

 

[linkster]

Big auto's dealership problem is not the relatively small amount of markup that the dealers add to every new car sale, the problem is that the dealers don't want to sell EVs because they don't make money servicing them. So they steer prospects to ICEs because that's where the money is.

Most certainly ! Their current business models can, in no way, stay afloat selling EVs.

 

[wart]

Is that the reason? If so, I confess I don't see the logic there, because I don't think that's a valid premise.

Scroll up a bit and look at the charts that richkae posted. Now consider this:

A typical ICE owner goes to a typical car dealership for periodic maintenance. The dealership service department performs the maintenance and puts a sticker on the inside of the windshield at the top left corner, reminding the owner to come back in 3000 MILES OR 3 MONTHS, whichever comes first. Now, you and I know something about cars so we know this is nonsense, that car doesn't need an oil change for at least 5000 miles, probably more. But the typical owner isn't going to know any better, they are going to come back in 3 months, and the dealership is going to charge them $50 for an unnecessary oil change. And as long as they are there, how about having your fuel injectors cleaned out for maybe a little upcharge? And come back in another 3 months of course.

Now if you're dealing with a REALLY unscrupulous dealership (as opposed to a routinely unscrupulous dealership) they will deliberately overfill the crankcase, or strip out the threads on the radiator drain plug, or unplug a vacuum hose, or something else that will cause a problem but leave the car basically running for a while. I have actually had all of these things actually happen to me. So now the owner has to come back for more service. And maybe it doesn't even cost the owner anything, because maybe the car is still under the drivetrain warranty. But the dealer can still hit the manufacturer for the cost of warranty work, which is still money in the dealer's pocket.

Now, suppose the car is electric. No oil to change, no fuel injectors to clean. What's the dealer going to do to get that service revenue? Change the battery coolant every 3 months? How many customers do you suppose are going to fall for that?

 

[CliffG]

Most certainly ! Their current business models can, in no way, stay afloat selling EVs.

and yet... maybe it's just that they don't believe their profit margins will be sustained. Much as I have no desire or intention to ever deal with an auto dealer again, there are millions of people who have no such disdain. EVs - although less susceptible to the kinds of problems ICEVs have - still have, and are still going to have, repair and service needs. Not every manufacturer is going to use the same design criteria Tesla does. I can easily see the other manufacturers continuing to make defective^H^H^H^H^H^H^H^H^Hvulnerable products that will eventually require similarly expensive servicing. If that was made clear to the big dealers, I wonder if their current offensive would change.

 

[Skotty]

The auto dealers in the united states made 5.5 billion dollars of PROFIT in 2013 on their service and parts departments.
PROFIT!
That is more than 4 times what they made selling new cars. Over the last 10 years, they actually lose money on average selling new cars and the vast majority of the profits come from service.

I will post this image again - directly from the NADA 2013 "State of the Industry Report" http://www.nada.org/NR/rdonlyres/1B512AC7-DCFC-472C-A854-6F5527931A2F/0/2013_NADA_Data_102113.pdf
View attachment 62444

Is it just me, or does it look like they are manipulating parts and service costs to balance out changes in new car sales?

 

[AudubonB]

OK, I see your counterarguments.

 

[ggr]

Is it just me, or does it look like they are manipulating parts and service costs to balance out changes in new car sales?

Not necessarily; it could be that since fewer people were buying new cars, the existing fleet was getting more than usual maintenance. "I'm stuck with this thing for a while, better change the filters and transmission fluid...".

But you're right, it could be they were trying to make up for lost revenue ;-)

 

[Olle]

Scroll up a bit and look at the charts that richkae posted. Now consider this:

A typical ICE owner goes to a typical car dealership for periodic maintenance. The dealership service department performs the maintenance and puts a sticker on the inside of the windshield at the top left corner, reminding the owner to come back in 3000 MILES OR 3 MONTHS, whichever comes first. Now, you and I know something about cars so we know this is nonsense, that car doesn't need an oil change for at least 5000 miles, probably more. But the typical owner isn't going to know any better, they are going to come back in 3 months, and the dealership is going to charge them $50 for an unnecessary oil change. And as long as they are there, how about having your fuel injectors cleaned out for maybe a little upcharge? And come back in another 3 months of course.

Now if you're dealing with a REALLY unscrupulous dealership (as opposed to a routinely unscrupulous dealership) they will deliberately overfill the crankcase, or strip out the threads on the radiator drain plug, or unplug a vacuum hose, or something else that will cause a problem but leave the car basically running for a while. I have actually had all of these things actually happen to me. So now the owner has to come back for more service. And maybe it doesn't even cost the owner anything, because maybe the car is still under the drivetrain warranty. But the dealer can still hit the manufacturer for the cost of warranty work, which is still money in the dealer's pocket.

Now, suppose the car is electric. No oil to change, no fuel injectors to clean. What's the dealer going to do to get that service revenue? Change the battery coolant every 3 months? How many customers do you suppose are going to fall for that?

An unscrupulous dealer could do similar things to an EV too. change oil in the gearbox, change break pads, how about changing out some relays and cables too? And put up a sticker to come back after 3 months for more service

 

[Johan]

Is it just me, or does it look like they are manipulating parts and service costs to balance out changes in new car sales?

Yup! Why would the service curve go up as profit from new car sales go down? One possible reason, that I could think of, actually: that when ppl. have less money to buy new cars they keep their old ones longer at use more money towards keeping them on the road? Also note the third curve (profit from service and parts) where the Y-axis goes to 500, while on the other it goes to 200. So magnify any change by x2,5. So of course dealers make money in both the good and the bad years!

 

[JST]

Scroll up a bit and look at the charts that richkae posted. Now consider this:

A typical ICE owner goes to a typical car dealership for periodic maintenance. The dealership service department performs the maintenance and puts a sticker on the inside of the windshield at the top left corner, reminding the owner to come back in 3000 MILES OR 3 MONTHS, whichever comes first. Now, you and I know something about cars so we know this is nonsense, that car doesn't need an oil change for at least 5000 miles, probably more. But the typical owner isn't going to know any better, they are going to come back in 3 months, and the dealership is going to charge them $50 for an unnecessary oil change. And as long as they are there, how about having your fuel injectors cleaned out for maybe a little upcharge? And come back in another 3 months of course.

Now if you're dealing with a REALLY unscrupulous dealership (as opposed to a routinely unscrupulous dealership) they will deliberately overfill the crankcase, or strip out the threads on the radiator drain plug, or unplug a vacuum hose, or something else that will cause a problem but leave the car basically running for a while. I have actually had all of these things actually happen to me. So now the owner has to come back for more service. And maybe it doesn't even cost the owner anything, because maybe the car is still under the drivetrain warranty. But the dealer can still hit the manufacturer for the cost of warranty work, which is still money in the dealer's pocket.

Now, suppose the car is electric. No oil to change, no fuel injectors to clean. What's the dealer going to do to get that service revenue? Change the battery coolant every 3 months? How many customers do you suppose are going to fall for that?

So, I hear this argument a lot, but I think it's vastly overstated. Just to take an example, it's great that the Model S doesn't need oil changes or spark plugs...but it still requires an annual service that costs more than I'll spend this year servicing either of my other two ICE cars.

And make it more general--essentially all of the appliances in my house are collections of electric motors, electric wiring, and computer components of one type or another. I would *love* it if that meant that my appliances are problem free. In fact, my experience with household white goods is that they have abysmal reliability and are constructed of parts that fail with a frequency that inspires despair. When they stop working, the problems are difficult to diagnose and in many cases impossible to fix (economically).

Similarly, the problems that I've had with my ICE cars recently haven't been so much of the "engine broke" category, but rather of the "oh, crap, another electric gremlin" variety.

I am not saying that Tesla has done or will do that. I am saying that in vehicles built to a price consisting of thousands of mechanical, electrical and electronic subsystems, there is *always* going to be a role for service departments. If I were a dealer, I wouldn't be that worried about the rise of the electric car.

 

[ecarfan]

Is that the reason? If so, I confess I don't see the logic there, because I don't think that's a valid premise.

See the post by @richkae just above yours about the profits that dealers make selling parts and service for ICE vehicles.

 

[richkae]

I have no idea whether EVs will really pan out to need less service over their lives. I hope they do.

I just think it is critical to remember that auto dealers are not in the business of selling new cars. They are in the business of servicing cars.
Selling cars is just a way to capture customers for the service business.
As a minor side business they take trade ins and mark them up and resell them as used cars.
New cars are a loss leader.