Has it dawned on anyone?

[dsm363]

But you're missing my point. If you think that the full extent of our opponent's opposition is simply only going to come from consumer protection laws then you're being short-sighted. They are going to draw upon each and every single resource available to them, not only NADA. You've focused on this one issue, but it is not going to be the one single battle to be fought.

I don't think anyone here thinks the dealers will only use one form of attack or one argument to defend themselves. We're all trying to understand exactly where you are going with this. Most of us know why the laws are on the books and that those in power and the dealerships backed by millions of dollars will use any means necessary, make any argument necessary and say anything necessary to win. That doesn't mean their arguments have validity or even that their position is right. They may be 'legal' because, well, they helped write the laws. When you help write laws it's amazing at how often those laws and regulations tend to benefit you.

 

[Krugerrand]

But you're missing my point. If you think that the full extent of our opponent's opposition is simply only going to come from consumer protection laws then you're being short-sighted. They are going to draw upon each and every single resource available to them, not only NADA. You've focused on this one issue, but it is not going to be the one single battle to be fought.

Except that you can only fight each battle as it presents itself. No doubt they'll pull out every stop. Does not matter. One obstacle at a time. Worrying about conquering every possible battle that may or may not present itself splits attention and resources, and causes spinning wheels. Stay on point.

 

[carogan]

Sorry, but all evidence is to the contrary. I'll not list a whole bunch of sources but here's just one good one from Forbes in 2012:

forbes.com/the-surprising-ways-car-dealers-make-the-most-money-off-of-you/



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I suspect that no-one here will disagree with the principle of that statement. The issue is that the foxes hold the keys to the hen-house.

Nigel, I have run dealerships for the better part of my life (as I said in earlier posts) including a family owned dealership. Forbes does not run auto dealerships.

Profit centers, from highest to lowest earning are as follows:

1. Used car sales
2. New car sales
3. Business office
4. Service dept/detail
5. Parts
6. Bodyshop

Any well run auto dealers will make FAR more from their sales centers than their service. That is a fact. Parts and service income is just but a fraction of their overall revenue, unless the sales department is horrifically run.

On an average, a used car sale will generate a gross profit of approx. $3,500/unit, a new car sale approx. $1,500-$2,000/unit, and the business office will generate approx. $1,000/unit for every sale that goes through it. Now please imagine a dealership that sells 100 to 200 units per month, and try to figure out how many oil changes and spark plugs a parts and service department needs to do in order to even come close to how much money a dealership sales department generates.

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Not TM's problem to solve. As reasonable as this may sound party A can never solve the problems of party B when party B feels threatened by party A.
As others have said: it's adapt or die.

I've heard it being said as: It's not that people don't want to change, it's that people don't want to be changed.

But you're forgetting about Party C (legislators), who Party B has the ear of.

Learn what the REAL concerns of Party C are. It seems to me that everybody here just assumes that the concerns of our legislators opposing us are exactly the same as auto dealers. They are not.

 

[dsm363]

Nigel, I have run dealerships for the better part of my life (as I said in earlier posts) including a family owned dealership. Forbes does not run auto dealerships.

Profit centers, from highest to lowest earning are as follows:

1. Used car sales
2. New car sales
3. Business office
4. Service dept/detail
5. Parts
6. Bodyshop

Any well run auto dealers will make FAR more from their sales centers than their service. That is a fact. Parts and service income is just but a fraction of their overall revenue, unless the sales department is horrifically run.

Maybe it is different in the US as the NADA themselves say that over half their profits are from service;
How Do Car Dealers Make Money? | Autobytel.com

In 2008, the NADA deduced that service departments and parts sales account for about 55 percent of a dealer’s total profits, on average.

I don't see why cars deserve so much more protection that any other product. I can price a MacPro out to $10,000 if I try really hard but am allowed to buy that right from Apple. It's also possible to buy a new car for that amount too although the average is likely 2.5X that amount.

 

[Merrill]

I would like to point out that this dealer issue is not much different than direct to consumers laws in various states related to wine sales. There are still a dozen states that do not allow winery's to ship directly to consumers. This is only related to a strong distribution network in those states that have the power and money to dictate to the politicians. That's it. The distributors feel that they would lose some of there profit by letting this happen, which is not totally true in that right now all wine sales that are direct to consumer in the USA only constitutes about 1% of all sales. Even if you allow the rest of the states to ship direct to consumers that number would probably not change. Again it gets down to a few powerful special interest groups that have the politicians in there pockets. Please do not send me a reputation comment on this.

 

[Krugerrand]

Nigel, I have run dealerships for the better part of my life (as I said in earlier posts) including a family owned dealership. Forbes does not run auto dealerships.

Profit centers, from highest to lowest earning are as follows:

1. Used car sales
2. New car sales
3. Business office
4. Service dept/detail
5. Parts
6. Bodyshop

Any well run auto dealers will make FAR more from their sales centers than their service. That is a fact. Parts and service income is just but a fraction of their overall revenue, unless the sales department is horrifically run.

On an average, a used car sale will generate a gross profit of approx. $3,500/unit, a new car sale approx. $1,500-$2,000/unit, and the business office will generate approx. $1,000/unit for every sale that goes through it. Now please imagine a dealership that sells 100 to 200 units per month, and try to figure out how many oil changes and spark plugs a parts and service department needs to do in order to even come close to how much money a dealership sales department generates.

So, all Dealerships are created equally then in terms of the size of the population they serve, how much access they have to used vehicles (all of the same age, condition, value) etc...? You're telling me that the Chevy Dealership in some smaller, rural town that serves a 100 square miles of farmers and *blink and you'll miss me towns* is the same as the Chevy Dealership in downtown (fill in your medium to large to metropolitan city of choice)? That all of them, across NA sell 100-200 units per month and have the exact same profit breakdown as your Dealerships? That's what you're telling us?

 

[dsm363]

But you're forgetting about Party C (legislators), who Party B has the ear of.

Learn what the REAL concerns of Party C are. It seems to me that everybody here just assumes that the concerns of our legislators opposing us are exactly the same as auto dealers. They are not.

Is it really a mystery what their concerns are? They are politicians so their primary concern is staying in office. If party B gives them a ton of money and helps them stay if office then it seems fairly clear.

 

[Larry Chanin]

The issue is that the foxes hold the keys to the hen-house.

How true. As you know one of our legislators own car dealerships. :crying:

Larry

 

[carogan]

Except that you can only fight each battle as it presents itself. No doubt they'll pull out every stop. Does not matter. One obstacle at a time. Worrying about conquering every possible battle that may or may not present itself splits attention and resources, and causes spinning wheels. Stay on point.

I agree with you. That is why I don't think going to federal court is going to solve any issue. Each state that is opposing this have different issues. I would argue that the biggest ones that legislators have is the loss of jobs/tax revenue/political contributions, ideology, as well as their influence on the balance of power in the competitive marketplace. This is different than the dealer perspective who is solely concerned about competitiveness and self-preservation.

States are not going to just give up jurisdiction if they can argue that their presence on these issues are necessary (for whatever reason). If the state (rightly or wrongly) believes that it is necessary to maintain the dealership framework (whether for consumer or industry protection/jobs/taxes etc...etc) federal courts won't interfere with that so long as the rules are the same for all the participants.

 

[dsm363]

I agree with you. That is why I don't think going to federal court is going to solve any issue. Each state that is opposing this have different issues. I would argue that the biggest ones that legislators have is the loss of jobs/tax revenue/political contributions, ideology, as well as their influence on the balance of power in the competitive marketplace. This is different than the dealer perspective who is solely concerned about competitiveness and self-preservation.

States are not going to just give up jurisdiction if they can argue that their presence on these issues are necessary (for whatever reason). If the state (rightly or wrongly) believes that it is necessary to maintain the dealership framework (whether for consumer or industry protection/jobs/taxes etc...etc) federal courts won't interfere with that so long as the rules are the same for all the participants.

You didn't respond to this but why does Tesla installing a sales and service center in a city where none existed before mean lost jobs?

Feel free to comment on any of the points I brought up including that service makes up over half of dealership revenue as well.

 

[carogan]

That is not even the real intent of the law, that is how the NADA is using it to block any outside competition though. If that is the real intent, why doesn't it extend to computers, mobile phones, TVs....etc?

Elon brought up a great example at the Texas House hearing. Imagine if Michael Dell (who the Texas legislators applaud rightfully so as being a shining beacon and example of a Texas businessman) was forced to bring his basically kit computer to Office Depot and beg them to sell his product when he was just a college kid starting out. They would have laughed at him and he would never have entered the market and the Austin area would be without thousands of jobs. Why would Office Depot want to buy a computer from some kid when they can buy a 'real' computer from HP or IBM? The fact that Michael Dell could sell directly to the customer and let them decide is how things are supposed to work. The fact that computers weren't forced to be sold through 'licensed dealers' like Best Buy or Office Depot meant he could do that. He had no prior business relationship with Best Buy or Office Depot so he wasn't breaking an agreement. He might have indirectly hurt them people people starting ordering his computer instead of shopping there but that is how things go.

If we are truly to ever reduce our dependence on oil then surprise! That means people will be laid off as well. Does this mean the state should enact laws banning improvements in automotive efficiency (more efficient cars means less gas needed? Every move forward means someone will lose their job. We need to help them find a new one. If that means retraining former ICE salespeople to sell EVs I'm pretty sure they could manage.

But it can (rightly) be argued that NADA isn't necessarily attempting to block outside competition. It is my understanding that Tesla is free to set up dealerships anywhere they want.

We can all take this wonderfully self-righteous view that the "free market" should reign and Tesla ought to be allowed to sell and distribute its product however it wants. The reality is that there will be millions of people who are going to be impacted almost immediately by this - and legislators know this.

I just imagine this in my own mind like a gang of people with butchers knives and chain saws walking into a crowd of helpless children locked in a room. Yes, the law SHOULD allow us to practice free market principles, but I do not think that decision makers are going to just allow the slaughter to happen unless we understand and can alleviate their concerns.

 

[Krugerrand]

But you're forgetting about Party C (legislators), who Party B has the ear of.

Learn what the REAL concerns of Party C are. It seems to me that everybody here just assumes that the concerns of our legislators opposing us are exactly the same as auto dealers. They are not.

Their concerns are irrelevant. They work for *The People* and *The People* don't require (nor do they want) legislation that prohibits them from buying a specific product in their state via direct contact or via the Internet - in this case a car. End of story. It's really that simple. If they feel a need to bow to powerful groups like NADA that adversely affect *The People* or goes against the wishes of *The People* then might I suggest they choose another line of work that allows them to be good and honest people. I hear there's a job opening on The Food Network.

 

[carogan]

Maybe it is different in the US as the NADA themselves say that over half their profits are from service;
How Do Car Dealers Make Money? | Autobytel.com

I can answer this question quite easily for you. Its because they lie.

I don't see why cars deserve so much more protection that any other product. I can price a MacPro out to $10,000 if I try really hard but am allowed to buy that right from Apple. It's also possible to buy a new car for that amount too although the average is likely 2.5X that amount.

This isn't about "deserve". They don't deserve this protection. I think they deserve to be slaughtered.

But the fact is that the slaughter might be massive, the pigs aren't quite ready to just walk into the slaughterhouse for us yet, and the lawmakers have to answer to their constituents.

 

[dsm363]

But it can (rightly) be argued that NADA isn't necessarily attempting to block outside competition. It is my understanding that Tesla is free to set up dealerships anywhere they want.

We can all take this wonderfully self-righteous view that the "free market" should reign and Tesla ought to be allowed to sell and distribute its product however it wants. The reality is that there will be millions of people who are going to be impacted almost immediately by this - and legislators know this.

I just imagine this in my own mind like a gang of people with butchers knives and chain saws walking into a crowd of helpless children locked in a room. Yes, the law SHOULD allow us to practice free market principles, but I do not think that decision makers are going to just allow the slaughter to happen unless we understand and can alleviate their concerns.

Tesla is allowed to set up dealerships but that means setting up dealerships, selling franchise license and losing control of sales in the state.

How exactly are millions of people effected by this other than one consumer decides to buy a Tesla rather than a Mercedes for example? Does that consumer have the right to decide to buy a Mercedes over a BMW or and Audi and what role should the state have in that decision? To the consumer, they want to buy a product and it shouldn't matter who sells it. If the dealership model really is better than what is wrong with competition from a different sales method? If the direct sales model is better that why should it be stopped? Again, you didn't address why cars deserve special protections that we don't afford to computers, hardware stores, newspapers....etc

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I can answer this question quite easily for you. Its because they lie.

I guess we agree on something. NADA lies.

 

[Krugerrand]

I agree with you. That is why I don't think going to federal court is going to solve any issue. Each state that is opposing this have different issues. I would argue that the biggest ones that legislators have is the loss of jobs/tax revenue/political contributions, ideology, as well as their influence on the balance of power in the competitive marketplace. This is different than the dealer perspective who is solely concerned about competitiveness and self-preservation.

Well, it's not in federal court, so....why are we worrying about it?

I would say that legislators are short-sighted. As one door closes, another opens. EV's create their own market, their own jobs, their own taxes, revenues etc.. and as I said earlier, the ICE industry will not suddenly cease to exist overnight. Decades from now there will still be a rather vast 'Classic Car' industry if Tesla succeeds in their ultimate goal.

States are not going to just give up jurisdiction if they can argue that their presence on these issues are necessary (for whatever reason). If the state (rightly or wrongly) believes that it is necessary to maintain the dealership framework (whether for consumer or industry protection/jobs/taxes etc...etc) federal courts won't interfere with that so long as the rules are the same for all the participants.

We'll see.

 

[carogan]

Their concerns are irrelevant. They work for *The People* and *The People* don't require (nor do they want) legislation that prohibits them from buying a specific product in their state via direct contact or via the Internet - in this case a car. End of story. It's really that simple. If they feel a need to bow to powerful groups like NADA that adversely affect *The People* or goes against the wishes of *The People* then might I suggest they choose another line of work that allows them to be good and honest people. I hear there's a job opening on The Food Network.

You make a big assumption when you say "the people" want this. You don't necessarily know this.


I know you're going to point out to surveys saying "87% support the idea of direct to consumer selling" - but you need to realize that those people being surveyed are not having the ENTIRE question being framed for them.

 

[dsm363]

This isn't about "deserve". They don't deserve this protection. I think they deserve to be slaughtered.

But the fact is that the slaughter might be massive, the pigs aren't quite ready to just walk into the slaughterhouse for us yet, and the lawmakers have to answer to their constituents.

I agree. Their constituents are actually customers that number in the tens of millions who when polled, hate dealerships and want a direct to consumer sales model. The number of people who contribute major donations to politicians are much, much smaller and those are the people that get heard. If they truly listened to their constituents then this wouldn't be an issue.

The fight for direct car sales - Opinion - The Boston Globe

The same argument goes for any old industry though. Should we never transition off of oil for transportation at least as we have a multi-billion dollar oil and gas industry? Why didn't we legislative away the airline industry to protect the railroads back in the day? The argument that nothing can be done as people will lose their jobs would mean there would never be any progress if we stuck to that rule.

 

[richkae]

The auto dealers are basically parasites and provide no value. They can probably survive as long as the existing auto industry survives if most people do not become aware of this.
Clearly they do not believe that their model is actually superior or they would just try to win in the marketplace.

Tesla has established that they can sell without dealers in most states. Even if they capitulated to the dealer demands in some states I don't see how that could possibly work. They have more demand than product - they aren't going to give a Tesla to a dealer at a wholesale price when they could sell it at full price to someone in another state.
I don't think Tesla will back down, they can survive and thrive even if they are locked out of a couple of states.

So the dealers are picking a fight with Tesla and hoping that Tesla will die and go away. If they win, Tesla dies and they get to live. If Tesla survives, every customer in a state they have locked Tesla out of sees that they provide no value and they will ultimately lose and have their protectionist laws overturned. When their protectionist laws are overturned - the manufacturers are going to move on them and they will die.

I see that they have two choices: Fight Tesla now and maybe die sooner. Leave Tesla alone also maybe die - just much later.
If they win some battles in a few states, and Tesla does not die - they will greatly accelerate their own demise.

I think their best course of action by far is to leave Tesla alone and hope that: (a) people do not notice the difference between a factory store and an independent dealer, (b) new manufacturers like Tesla don't dominate the industry very quickly.
Even if they win a few battles and lock Tesla out of a few states, I think the free publicity will be worth more than the lost sales to Tesla.
The best thing for the consumer is for the dealers to win a few battles and make a lot of stink and prove to the people in those states that they provide no value - thus causing them to lose their protection across the entire country.

 

[carogan]

Tesla is allowed to set up dealerships but that means setting up dealerships, selling franchise license and losing control of sales in the state.

How exactly are millions of people effected by this other than one consumer decides to buy a Tesla rather than a Mercedes for example? Does that consumer have the right to decide to buy a Mercedes over a BMW or and Audi and what role should the state have in that decision? To the consumer, they want to buy a product and it shouldn't matter who sells it. If the dealership model really is better than what is wrong with competition for a different sales method? If the direct sales model is better that why should it be stopped? Again, you didn't address why cars deserve special protections that we don't afford to computers, hardware stores, newspapers....etc

Millions of people I am referring to are the stakeholders currently in the auto industry.

I am not disagreeing with what many people on here are arguing in principle. And I do not believe the dealership model is the "best" way to go either.

The reality is that a car dealership owner will have invested $5 million, $10 million, $20 million or more in a dealership with numerous, well paid employees working for them. And in every community there will be 5, 10, 20 of these stores.

The local Apple store...how much will they have invested? They'll have a space leased out, have some inventory (much carried by the manufacturer) some desks, shelving and chairs (you get what I mean).


I'm not saying that they "deserve" this protection over the Apple dealer, or the local newspaper. I am saying that this is a fight we need to first determine is one that we can actually win, and then decide is it one we want to take on. Collectively you are threatening thousands upon thousands of dealers who have billions invested and they won't go down quietly.

Think of it like this - maybe we believe the US could win a war with China, but do you really want to go there?

 

[Jeff Miller]

This is nothing more than a classic example of a powerful cartel trying to maintain its ability to extract rents using its political power to cut back room deals with ignorant and venal politicians. The rents are clearly at the expense of the rest of the population. Greece is an excellent case study on how countries that favor this approach to business end up.