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jvm | 3 years ago

Selling online without negotiated price is a big change. That should make the dealerships really uncomfortable in the long run… he's kind of saying "oh the dealerships could rent out Mustangs" but is that actually realistic?

discuss

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toomuchtodo|3 years ago

Diplomacy is the art of saying “good dog” until you make it to the rock. Ford is learning what Tesla knew from the start: dealership interests aren’t aligned with EV manufacturers. There’s very little service revenue, and dealers are incentivized to add “market adjustments” to vehicles (which Ford dealers have been doing) creating a poor customer experience. Ford has existing dealerships and is going to have a heck of a time hacking around dealer franchise law compared to EV automakers who have no established dealer network. Someone on Twitter recently posted their Model S turning over 400,000km with only $3k in maintenance costs. Imagine at scale what that does to dealership revenue when 5, 10, 15 million EVs are sold per year (which will happen in the next 5-10 years).

https://twitter.com/pluginalberta/status/1531406942119137281

> "We only profit in one way: from new car sales and new car sales alone," Maron said. "We can't ... profit from services because our cars have far less parts than gas-powered cars. There's no regular service visits for engine tune-ups and oil changes. ... We don't make money off financing programs. We don't have insurance products or add-ons. A franchise dealer would look at this and scratch their heads. They would not know how to make money on this model."

> Maron says Tesla is fully committed to its mission of replacing all gas-powered cars with electric vehicles -- a mission auto dealers may not be eager to embrace.

> "We don't simply believe that electric vehicles represent a nice complement to gas-powered cars," Maron said. "We believe it's imperative they are replaced entirely by electric vehicles. ... It would be impossible for traditional dealers to convey this message adequately. This isn't a knock on them, but dealers are not fundamentally committed to the mission of EVs — we are. They make 99% of their revenue off of gas-powered cars. If you're opening a Yankees team store, are you going to ask a lifelong Red Sox fan to manage it?"

https://www.buzzfeednews.com/article/johanabhuiyan/tesla-sla... (2016: 7 Reasons Why Tesla Doesn't Want To Sell Through Dealerships)

climb_stealth|3 years ago

That is very impressive actually. Though your typo made me laugh out loud.

> Someone on Twitter recently posted their Model S turning over 400km with only $3k in maintenance costs.

400 kilometers and a $3k maintenance bill somewhat reflects the image of Tesla that you see a lot on the internet. Whether or not that is actually the case.

jayceekay|3 years ago

> "Diplomacy is the art of saying “good dog” until you make it to the rock."

this was new to me and the 'to the rock' part didn't make sense to me, so i looked it up.

http://marvin.cs.uidaho.edu/About/quotes.html this page says it's actually this: "Diplomacy is the art of saying 'nice doggy' until you can find a rock."

find a rock as in kill them? :O

heavyset_go|3 years ago

Unfortunately, manufacturers' interests are often not aligned with retail customers' interests.

For example, with Tesla, the company optimizes delivery numbers of cars sold by sacrificing quality control, and their service center model is anemic and almost an afterthought, especially when it comes to addressing the QC issues their customers experience.

For every Tesla with 400k miles on them with a few thousand dollars in maintenance costs, there are a dozen cars that are delivered to customers like this one[1] from today on r/TeslaLounge, with 17 blatant issues upon delivery that QC should have caught early on in the process. There are stories on that subreddit about customers having to wait months, without a loaner car, for service centers to fix their cars or to even get service centers on the phone about the status of their repairs and cars.

Dealerships act as an intermediary customer that can perform QC, repairs, customization, service, maintenance, reject deliveries etc that manufacturers choose to skimp out on.

[1] https://old.reddit.com/r/TeslaLounge/comments/v3jkn3/update_...

thaeli|3 years ago

Is there really that much service revenue for modern ICE cars that isn't stuff BEV cars need too? Modern powertrains are pretty bulletproof, 10k oil changes and 30k air filters will get you to 100k miles. "Tune ups" aren't really a thing anymore either, especially in the first 100k.

Brakes? Maybe you're cutting out one or two pad slaps in that 100k.

Oil changes? Yeah, you've eliminated those, the lowest margin service dealers do.

Suspension components, air conditioning, etc? No difference, and that stuff shouldn't need to be touched in the first 100k anyway.

Tires? BEVs eat tires.

Still need wiper blades, cabin filters, etc. But those aren't big items either way.

I guess I just don't see where all this recurring service revenue comes from. Cars just don't break until they're 10-15 years old. Maybe some cars are really that unreliable still?

grogenaut|3 years ago

I've bought 3 cars since 2008, I've spent $0 at the dealer on maintenance, they're all ICE... you shouldn't be going to the dealer unless it's warranty work. [well partly true, had a covered recall].

That said I had a dealer cuss me out for bringing them a quote from a mechanic for the same clutch replacement. "I can't f**ing cover my dealership like that" as if it was my problem. Same dealer who charged me $2k for a repair when they had the recall letter in their inbox.

olyjohn|3 years ago

$3k in maintenance costs for 400,000km? I call bull shit. In Tesla tire sizes, you're looking at $1000 for a cheap ass set of tires. Certainly not gonna last 100,000 miles either.

otabdeveloper4|3 years ago

Electric personal mobility devices are now more popular than mechanical bycicles and motorcycles.

Electric devices require significantly more servicing than mechanical ones. On the flip side, people seem content to treat electric devices like they're disposable and just buy a new one every year.

I don't think this dynamic won't hold for larger-sized EV's.

ramesh31|3 years ago

>Someone on Twitter recently posted their Model S turning over 400,000km with only $3k in maintenance costs.

Sounds like a Toyota

justapassenger|3 years ago

> dealership interests aren’t aligned with EV manufacturers. There’s very little service revenue

Citation needed. Both my EVs and ICEs needed similar amount of service. Breakage of drive trains are super rare nowadays (expect for over engineered performance stuff and just broken designs), same as breakages of batteries (cough, Bolt, cough).

All stuff my cars needed a service for in last 20 years were comfort features, gizmos, internal materials, electrical goblins, etc. Both ICEs and EVs.

option_key|3 years ago

That's how it already works in Europe. Prices are set by the manufacturer and most cars are built to order. Dealerships rarely have their own branding, they basically work as franchises integrated with the manufacturer's network.

Their role is to collect orders, provide test rides and service the cars.

jaredhansen|3 years ago

This might be right, but I'm not so sure. Public perception is that dealerships are adverse to customers because of information asymmetry + price haggling, and that online sales will hurt them -- but in many conversations with multiple different car industry insiders, they all say that dealers make almost no money car sales, and instead make almost all of it on financing, service and parts. That you can almost model the car dealing parts of a dealership as lead gen for the service desk / finance desk.

I don't know if that's right (anybody with more info care to comment?), but it's at least enough to give me pause on the "dealers will hate nonnegotiable pricing" claim.

bluGill|3 years ago

You are missing used car sales. Most people who buy a new car trade in their old car and the dealer makes a killing on that. (when the car is leased that almost always amounts to a trade in from the dealer's perspective, though once in a while the lease company will sell the car in some way other than the dealer).

You are correct that there is no real money in new car sales anymore.

thegranderson|3 years ago

Commissions are 30-40% of an auto dealer's costs as a % of gross profit. If salespeople don't have to negotiate price, you can cut a lot of that cost and focus on higher margin (e.g., financing) and subscription products (e.g., parts & services) that deepen customer loyalty. The big groups will be better at making these investments (and the investments needed to sell/maintain EVs) and will continue to consolidate what remains a highly fragmented industry (i.e., the two largest dealer groups, AN and LAD were each only 1.75% of new car sales in 2021).

I wouldn't cry for nor count the dealers out just yet.

dheera|3 years ago

I mean, I'm all for the dealerships dying. They do nothing but waste peoples' time. We don't actually need them and the scripts that the salespeople and buyers effectively recite to each other like a Shakespeare play.

sundvor|3 years ago

Not having to worry about price negotiation is a massive plus in my books.

Previously I could never sweet talk dealers into the kind of deals some of my mates could.

The Tesla model is such an improvement.

Seriomino|3 years ago

The dealership has to change anyway.

If banking and Everything else is a good example, people are getting used to buy online.

I bought even my current car without seeing it before.

I bought my bike online as well.

If more and more do that dealerships might loose too much revenue anyway to keep them afloat.

jn1234|3 years ago

It's because Ford hates the dealer markup they've started charging in last couple of years.