Well, they do produce value. Ford couldn't possibly service every municipality in the country and thus relies on dealers. So, the dealers take the risk and do the market research, but Ford is always able to undercut them on price. But Ford probably still can't service all these locations, so they'll only undercut dealers in the most profitable centers and kick dealers out to pick up scraps. Understandably, many won't bother, and so now purchasing a vehicle becomes much harder. Since most dealerships now are full service centers and they have a monopoly on the diagnostic equipment necessary for servicing modern vehicles in some jurisdictions, this also means servicing a vehicle becomes much harder.
Makes sense -- that's why Tesla is so eager to sign up dealers, because it's totally worth the money they charge!
(That was sarcasm, btw. A tiny car maker like Tesla will never get anything like a fair deal from dealers, especially if state law gives dealers a monopoly. It's a disfunctional marketplace.)
I had a similar thought two years ago when I bought my car. I test drove about 6 differen't cars in total, if it was not for the fact that the dealer at the showroom was a complete dick, constantly trying to sell me a loan scheme which I did not want, I might have bought it from the dealer.
Instead I used an online broker firm. As a result I got about £5,000 off the list price of a £20,000 car. The joke is two years later someone offered me £14,000 for it last month, this is due to the lack of cars which qualify for exemption from Londons Congestion Charging Zone.
Now whilst I would hands down recommend the sales service I recieved from the broker, I still value the fact I was able to try so many differen't cars.
I think that we could potentially see a new system for doing test drives, either as Tesla has, the manufacturer pays for booths, which will often lack local knowledge (dealers know what sells in their patch better than some top down management).
Or, and this could be the interesting one, some form of part time demonstraiters. People who get a heavily discounted lease or similar (who would want a stranger to ruin their own gearbox, lease would be the only option) with the agreement to be available for 10 hours a week of test drives or similar. Given a £30k car leases normally for about £400 pcm, 40 hours a month of demotime would be a fair trade, for what is ultimately a fairly un-skilled job.
That's a different business and they could definitely sign up as third party servicers with Tesla (ie to charge Tesla for any warranty services they provide), but they just want to hold onto the dealership fees on top. Not that I can blame them, but this isn't an area where regulation benefits consumers.
I think the problem that he was stating is that Ford is essentially a monopoly on all Ford cars, which has especially damning implications for the car service market. The first casualty in a monopoly-dominated market is often the low-end consumer.
Whether that warrants the dealer protection laws, or whether they are effective at combating this problem by essentially creating another monopoly, is very debatable.
So? They are not a monopoly in cars in general - if Ford was not competitive people would switch.
And people don't go to dealers all that much for service, except when the car is new and you have no choice. They don't call them stealerships for nothing.
people don't go to dealers all that much for service
What evidence do you have to support this contention? Every car dealer I've ever been to has had a very busy service center, often to the point of requiring a week's notice to obtain an appointment. And in CA, at least, state law forbids manufacturers from requiring cars be serviced at a dealership as a condition of honoring the warranty.
And in CA, at least, state law forbids manufacturers from requiring cars be serviced at a dealership as a condition of honoring the warranty.
People assume it's better there, and since it's free (i.e. warranty), they go.
My evidence is reading car forums. It's not evidence to you since I can't share it, but it is for me. On top of that, to the best of my memory, I do not personally know of a single person (in my entire life) who has ever gone to a dealer for service except when they had no choice (i.e. warranty or dealer only part purchase). (And yes, I know that's not evidence either - especially since you know nothing about me.)
Someone I know once mentioned that someone they know went to a dealer for service and we thought that was the most bizarre thing ever. (i.e. We wondered why are they wasting their money.)
You clearly have been to car dealer service centers - is that for warranty work, or by choice?
One way in which this tension been resolved (often to the consumer's detriment) is with MAP (minimum advertised pricing) agreements. Such agreements, as an example, permit Apple and other electronic stores such as Best Buy to peacefully co-exist in markets in which they both have presence. Both parties agree not to undercut the other, and both share the burdens and benefits of sales.
With respect to dealerships' monopoly on repair knowledge, at least one state (Massachusetts) has passed a "Right to Repair" act, and car makers have largely made it easier for independent mechanics to obtain service and diagnostic information, so this issue is basically moot now. See, e.g., http://en.wikipedia.org/wiki/Motor_Vehicle_Owners'_Right_to_...
This doesn't explain why we need laws to fix anything. Your logic says that Ford's actions will make buying or servicing a Ford vehicle much harder. This directly affects Ford's sales, and thus their profit. There is healthy competition between vehicle manufacturers. So why would they behave this way, and why is it necessary to have a law that distorts the market?
Your supposition is that I said we need laws for this. I claimed dealers add value. You're arguing the wrong point with me.
That aside, your notion of competition implies all dealers have like models, which is incorrect. Sure, they all have sedans, but I've yet to find a Honda I feel comfortable driving in. There's plenty of other factors, too. Locations, maintenance schedules, manufacturing origin. It's not all that dissimilar from there being different laptop manufacturers.
So, if I really want a Ford (which was the example here), it's nice to have competition between Ford dealers. Otherwise, Ford could just become complacent. Likewise, I'd hate to see fiefdoms form where you really only can realistically buy one or two manufacturers because the third one determines moving in wouldn't be profitable enough.
This happens in other market and is not an issue. e.g.: 80% McDonald's are franchises [1], they tend to operate directly in area where higher profit is available (city centers, denser population).
It's not that they literally would not be capable in a logistical sense. It's that they would probably do a worse job of it than the independent dealers would. At least with independent dealers there's a lot of oversight; the people that own dealerships generally own a few, the biggest players maybe a few dozen.
Right now dealers aren't that great, they're the Mom & Pop bookstores. Having Ford sell directly would give us a Barnes & Noble experience. I personally think that might be worse.
I dislike dealers for sure and prefer to work on my car myself. I have the feeling I would dislike them even more if they were all run by Ford.
And if the protections were relaxed, manufacturer-certified repair centers would go the way of the dodo? That they're attached to the people who would want to sell you a replacement car if something goes wrong seems like a conflict of interest.
Yes, I'm aware that dealers sprung up as a sales channel for cash-strapped automakers. They didn't have the money for a nationwide retail campaign so dealers sprung up to do it for them, and to earn some profits in the process.
Let me know how that test drive on the Internet goes. I'm sure the 8 photos taken at the perfect angle will tell you everything. And shipping a single vehicle is probably going to be super cost-effective.
The people that live there probably do. There is an entire country outside of SF, NYC, and Cambridge and their suburbs. I could just be as glib and ask who really cares about Tesla and their battle with dealerships.
Comments
Well, they do produce value. Ford couldn't possibly service every municipality in the country and thus relies on dealers. So, the dealers take the risk and do the market research, but Ford is always able to undercut them on price. But Ford probably still can't service all these locations, so they'll only undercut dealers in the most profitable centers and kick dealers out to pick up scraps. Understandably, many won't bother, and so now purchasing a vehicle becomes much harder. Since most dealerships now are full service centers and they have a monopoly on the diagnostic equipment necessary for servicing modern vehicles in some jurisdictions, this also means servicing a vehicle becomes much harder.
Makes sense -- that's why Tesla is so eager to sign up dealers, because it's totally worth the money they charge!
(That was sarcasm, btw. A tiny car maker like Tesla will never get anything like a fair deal from dealers, especially if state law gives dealers a monopoly. It's a disfunctional marketplace.)
I had a similar thought two years ago when I bought my car. I test drove about 6 differen't cars in total, if it was not for the fact that the dealer at the showroom was a complete dick, constantly trying to sell me a loan scheme which I did not want, I might have bought it from the dealer.
Instead I used an online broker firm. As a result I got about £5,000 off the list price of a £20,000 car. The joke is two years later someone offered me £14,000 for it last month, this is due to the lack of cars which qualify for exemption from Londons Congestion Charging Zone.
Now whilst I would hands down recommend the sales service I recieved from the broker, I still value the fact I was able to try so many differen't cars.
I think that we could potentially see a new system for doing test drives, either as Tesla has, the manufacturer pays for booths, which will often lack local knowledge (dealers know what sells in their patch better than some top down management).
Or, and this could be the interesting one, some form of part time demonstraiters. People who get a heavily discounted lease or similar (who would want a stranger to ruin their own gearbox, lease would be the only option) with the agreement to be available for 10 hours a week of test drives or similar. Given a £30k car leases normally for about £400 pcm, 40 hours a month of demotime would be a fair trade, for what is ultimately a fairly un-skilled job.
Showrooming, using an actual showroom. Well played.
That's a different business and they could definitely sign up as third party servicers with Tesla (ie to charge Tesla for any warranty services they provide), but they just want to hold onto the dealership fees on top. Not that I can blame them, but this isn't an area where regulation benefits consumers.
Why can a dealer service a municipality if Ford can't? If anything it should be harder for the dealer since they are smaller.
I think the problem that he was stating is that Ford is essentially a monopoly on all Ford cars, which has especially damning implications for the car service market. The first casualty in a monopoly-dominated market is often the low-end consumer.
Whether that warrants the dealer protection laws, or whether they are effective at combating this problem by essentially creating another monopoly, is very debatable.
So? They are not a monopoly in cars in general - if Ford was not competitive people would switch.
And people don't go to dealers all that much for service, except when the car is new and you have no choice. They don't call them stealerships for nothing.
What evidence do you have to support this contention? Every car dealer I've ever been to has had a very busy service center, often to the point of requiring a week's notice to obtain an appointment. And in CA, at least, state law forbids manufacturers from requiring cars be serviced at a dealership as a condition of honoring the warranty.
People assume it's better there, and since it's free (i.e. warranty), they go.
My evidence is reading car forums. It's not evidence to you since I can't share it, but it is for me. On top of that, to the best of my memory, I do not personally know of a single person (in my entire life) who has ever gone to a dealer for service except when they had no choice (i.e. warranty or dealer only part purchase). (And yes, I know that's not evidence either - especially since you know nothing about me.)
Someone I know once mentioned that someone they know went to a dealer for service and we thought that was the most bizarre thing ever. (i.e. We wondered why are they wasting their money.)
You clearly have been to car dealer service centers - is that for warranty work, or by choice?
Yep, that attitude is demonstrated by "Always dealer serviced" being a common phrase in car ads.
One way in which this tension been resolved (often to the consumer's detriment) is with MAP (minimum advertised pricing) agreements. Such agreements, as an example, permit Apple and other electronic stores such as Best Buy to peacefully co-exist in markets in which they both have presence. Both parties agree not to undercut the other, and both share the burdens and benefits of sales.
With respect to dealerships' monopoly on repair knowledge, at least one state (Massachusetts) has passed a "Right to Repair" act, and car makers have largely made it easier for independent mechanics to obtain service and diagnostic information, so this issue is basically moot now. See, e.g., http://en.wikipedia.org/wiki/Motor_Vehicle_Owners'_Right_to_...
How is that different from price fixing?
It isn't. Wikipedia says this particular type of price fixing is often allowed, and called "Resale price maintenance"
It's the agreement between a manufacturer and a retailer about the price of a product, not an agreement between multiple retailers.
That should still be illegal. I thought manufacturers can only set a "recommended retail price", but retailers can set whatever price they want.
Plus, in this specific case the manufacturer (Apple) is also a retailer.
In Europe even a "recommended retail price" may be an issue in competition law.
MAPs are why you have 'add to cart to see the price' for many items.
They aren't fixing the price to the consumer. They are agreeing not to advertise a price below a certain value.
This doesn't explain why we need laws to fix anything. Your logic says that Ford's actions will make buying or servicing a Ford vehicle much harder. This directly affects Ford's sales, and thus their profit. There is healthy competition between vehicle manufacturers. So why would they behave this way, and why is it necessary to have a law that distorts the market?
Your supposition is that I said we need laws for this. I claimed dealers add value. You're arguing the wrong point with me.
That aside, your notion of competition implies all dealers have like models, which is incorrect. Sure, they all have sedans, but I've yet to find a Honda I feel comfortable driving in. There's plenty of other factors, too. Locations, maintenance schedules, manufacturing origin. It's not all that dissimilar from there being different laptop manufacturers.
So, if I really want a Ford (which was the example here), it's nice to have competition between Ford dealers. Otherwise, Ford could just become complacent. Likewise, I'd hate to see fiefdoms form where you really only can realistically buy one or two manufacturers because the third one determines moving in wouldn't be profitable enough.
This happens in other market and is not an issue. e.g.: 80% McDonald's are franchises [1], they tend to operate directly in area where higher profit is available (city centers, denser population).
[1]: http://www.aboutmcdonalds.com/mcd/franchising.html
Why?
It's not that they literally would not be capable in a logistical sense. It's that they would probably do a worse job of it than the independent dealers would. At least with independent dealers there's a lot of oversight; the people that own dealerships generally own a few, the biggest players maybe a few dozen.
Right now dealers aren't that great, they're the Mom & Pop bookstores. Having Ford sell directly would give us a Barnes & Noble experience. I personally think that might be worse.
I dislike dealers for sure and prefer to work on my car myself. I have the feeling I would dislike them even more if they were all run by Ford.
And if the protections were relaxed, manufacturer-certified repair centers would go the way of the dodo? That they're attached to the people who would want to sell you a replacement car if something goes wrong seems like a conflict of interest.
Do you prefer chain restaurants or local joints? Why?
Why?
Do you understand why dealers exist historically? It's completely different than what you're letting on.
Yes, I'm aware that dealers sprung up as a sales channel for cash-strapped automakers. They didn't have the money for a nationwide retail campaign so dealers sprung up to do it for them, and to earn some profits in the process.
Nowadays we have this thing called "buying online and having it delivered".
Let me know how that test drive on the Internet goes. I'm sure the 8 photos taken at the perfect angle will tell you everything. And shipping a single vehicle is probably going to be super cost-effective.
So? Who cares
The people that live there probably do. There is an entire country outside of SF, NYC, and Cambridge and their suburbs. I could just be as glib and ask who really cares about Tesla and their battle with dealerships.