Tag Archive | "auto dealers"

Will Auto Dealers Become an Endangered Species?


It’s been the best of times for auto dealers since the recession.

Those that survived picked up business from those that didn’t. They reorganized their operations to be leaner and more efficient. Auto sales soared 59 percent to 16.5 million last year from the 2010 low point, reports The Detroit News.

But reports from two different analysts say that dealers better start preparing for stormy, disruptive weather.

Looking several decades out, expect auto sales to plunge, Brian Johnson, an analyst at Barclays Research, recently told auto industry investors.

This will be caused by the rise of autonomous, or robotic, cars.

Looking forward 25 years, Johnson says about half of people will still purchase vehicles for driving in rural areas and for jobs that require driving. Everyone else — people who use vehicles purely as a means of transportation — will be sharing autonomous cars.

That would slash annual U.S. auto sales to 9.5 million.

“A historical precedent exists — horses once filled the many roles that cars fill today, but as the automobile came along, the population of horses dropped sharply,” Johnson said.

He estimated that such a transition would force manufacturers “to shrink dramatically to survive,” with General Motors and Ford slashing North American production by up to 68 percent and 58 percent, respectively. Such a reduction could turn thousands of auto dealerships into surplus real estate.

Meanwhile Adam Jonas of Morgan Stanley Research is telling investors to expect a massive consolidation among new and used car dealers and the service business.

“The U.S. auto retail pie is worth nearly $1 trillion split roughly 10,000 ways,” Jonas said.

“Putting aside dealer franchise laws … just given the technological changes we anticipate hitting the automotive industry, we think there could be some room for a bit of consolidation here,” he said, predicting the business will fall to “as few as tens of groups in the future.”

Much of this will come from people bypassing dealers.

“As consumers move from owning cars to sharing cars auto retailers will face fundamental changes to their place in the mobility ecosystem,” Jonas said.

This will raise legal questions as dealers attempt to use the patchwork of state franchise laws to protect their turf.

Efforts by dealer groups in various states to limit Tesla Motors’ move to bypass car dealers and sell its vehicles through company-owned stores is an early example of this tension

Other analysts are already pointing to the lawsuit filed earlier this month by the California New Car Dealers Association against TrueCar Inc., which operates a digital platform for car sales, as an example of dealers attempting to protect their business from technology-based interlopers.

“If a tech firm were to operate a fleet of say 10 million cars in a pay-by-the-mile or by-the-minute model, would such a business fall under the umbrella of current dealer franchise laws?” Jonas asked. “It’s a gray area. But as this issue attracts broader scrutiny and analysis we expect the gray to become black-and-white rather quickly.”

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Mass. High Court Rules For Tesla Over Auto Dealers


BOSTON — The state’s highest court on Monday upheld the right of Tesla Motors to sell directly to Massachusetts consumers, rather than through a dealership network, reported 90.9wbur.

Dealers including Herb Connolly Chevrolet sued to stop Tesla from selling its high-end electric cars from its store in the Natick Mall, saying Tesla was essentially operating its own dealership. The Massachusetts State Automobile Dealers Association argued that a 2002 change in state law barred manufacturers from owning dealerships.

But the Supreme Judicial Court disagreed, ruling that the 2002 amendment “was intended and understood only to prohibit manufacturer-owned dealerships when, unlike Tesla, the manufacturer already had an affiliated dealer or dealers in Massachusetts.”

The SJC ruling upheld a lower court ruling that dealers had no standing to challenge Tesla.

Tesla Motors said it’s gratified by the ruling. “The mission of this company from the very beginning has been to evangelize for electric vehicles,” said the company’s deputy general counsel Todd Maron. “Massachusetts is a key market for that; it’s very progressive. So we are looking forward to getting on with business now that the legal situation has been clarified.”

Robert O’Koniewski, executive vice president of the state auto dealers association, accuses Tesla of monopolizing sales, and said his organization is disappointed with the ruling.

“We as an association are going to have to look at what the decision says and try to assess whether we need to go back to the Legislature and ask them to fix that,” O’Koniewski said.

Wilmington auto dealer Scott Dube told WBUR last year that he feared allowing direct-to-consumer sales could disrupt the entire franchise system of dealership networks.

Tesla, a Silicon Valley carmaker, has just two models that cost several times the average price of a car.

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Tesla Sales Rules Must Favor Consumers, Not Dealers: FTC


Via Bloomberg

States looking at challenges to Tesla Motors (TSLA) Inc.’s direct-sales model should put consumers’ needs ahead of auto dealers’ interests, three top staff members of the U.S. Federal Trade Commission said.

As Tesla fights state by state for the right to sell its electric cars to consumers over the Internet without dealers, officials should consider the potential harm of banning challenges to existing industries and sales models, the directors said in a post on the agency’s blog today. The FTC has responsibilities on a national scale to promote business competition and protect consumers.

“Consumers can benefit from change,” the officials said. “Regulators should differentiate between regulations that truly protect consumers and those that protect the regulated.”

Tesla, led by Chief Executive Officer Elon Musk, is appealing New Jersey’s ban on direct sales in state court. Texas, Arizona, Virginia and Maryland have also passed laws barring the Palo Alto, California-based company’s dealer-free system. Ohio and New York have passed measures negotiated with dealers that limit the number of company-owned stores.

“We didn’t get into this debate by choice, and we didn’t pursue the direct-sales model to disrupt traditional dealer practices,” Diarmuid O’Connell, Tesla’s vice president of business development, said in a phone interview.

“Statutes that may have been created to protect consumers many years ago have been implemented mainly to protect the dealer body in many states,” he said.

The electric-car maker is studying its options to overturn bans on direct sales, O’Connell said. The company “agrees wholeheartedly” with the sentiments expressed in the FTC blog, he said.

‘Simple Right’

The blog item was written by three FTC directors: Andy Gavil of the policy planning office, Debbie Feinstein of the bureau of competition, and Marty Gaynor of the economics bureau. The officials said they were expressing their own opinions, not that of the commission or any of its voting members.

Tesla accounted for a little over 22,000 of more than 15 million cars sold in the U.S. in 2013, the FTC officials noted. The volume “hardly presents a serious competitive threat” to established dealers, they said.

The model may be attractive to other manufacturers, and this has led to jurisdiction-by-jurisdiction battles “for the simple right to sell its automobiles directly to consumers,” they said.

The company has said rules restricting direct car sales were created to protect dealers from unfair competition and mistreatment by manufacturers of the brands they sold. Since Tesla has no franchised dealers, it argues such rules shouldn’t apply to its retail operations.

Tesla fell 0.1 percent to $207.82 at 2:06 p.m. in New York. The shares rose 38 percent this year through yesterday.

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Insights From the Front Lines


At the 2012 Agent Summit, I had the opportunity to serve as moderator of a panel called “Five Ways to Take Your Agency From Provider Rep to Partner.” Our goal was to provide a discussion that would highlight effective ways to become a true partner with today’s dealer — and lead them to record profits.

I was joined by Tim Blochowiak of Protective Asset Protection, David Duncan of Safe-Guard Products International, Garrett Lacour of RoadVantage, John Luckett of First Extended Service Corp. and Ricky Wolfe of Interstate National Corp. These five strong voices in the agent arena shared how they are working through a changing market and providing innovative products and creative ways to maximize dealer profitability.

Let’s take a look at some of the many insights they provided:

Agents must offer new ways to present products.

In the F&I office, the presentation must match the changing behavior of customers. As an agent, bringing that kind of creative change will differentiate you from the competition.

The recent recession has made dramatic change in how consumers view their money. They are more resistant than ever to what they perceive as “extras.” Most customers who have bought a vehicle before have already experienced an F&I presentation. If the products and the way they are presented is the same as their last experience, they’re more likely to be resistant.

Great companies have used a changing environment as an opportunity to examine the way they do business and make creative changes that move more customers to buy.
Take Apple Computer, for example. In 1997, everyone was writing the company’s obituary. Then they re-launched their company with creative ideas and products and have since become a leader, and not just in home computing. Apple has become a new standard bearer for designing and marketing products that customers are motivated to buy.

On the flip side, companies like Kodak are going under because of their lack of urgency to change. Kodak introduced us to film photography and remained a market leader for decades. However when the market demanded digital photography, Kodak stalled. Now, they’re in bankruptcy. The message was clearly defined: Change and innovation today will lead to record profits tomorrow.

Adding underperforming dealerships to your roster will not lead to long-term and sustainable growth.

Successful agents have learned that it’s not about adding dealerships; it’s about selling products. Dealers need and demand income development. A well-trained and focused F&I team can change to meet the new perspective of customers and provide record profits in a challenging market. The bad news is that most dealerships cut or even eliminated their training budgets during the recent recession. The good news is that they’re turning to their agents to provide new training.

You have the opportunity to take a hands-on approach to growing the overall skill level of your dealers’ F&I teams. Your toolkit should include role-playing exercises, benchmarking and accountability. Certification through off-site training also will be valued and sought after by dealers.

The next step is establishing a new F&I process that utilizes the finer points of your training. Customers have already seen the high pressure, memorized sales pitch many F&I managers still swear by. Introduce your dealers to a customer-focused process that will provide an environment where customers feel someone is trying to help them make good decisions, rather than just trying to sell them something they don’t want or need.

Also, there is real opportunity to sell service contracts in the service drive. Many dealers have tried and failed in the past. But there are better approaches out there than there were 10 years ago, and it may be worth another shot. Providing your dealers with a new revenue stream will definitely help set you apart.

“How are you different than other agents? What can you provide that they don’t?”

Agents that are in a growth mode today have heard those questions from dealers more than once. Those who have the answer will see their stock soar.

Dealers are possibly the most sophisticated consumer in the market today. They have heard every sales pitch for just about every product on the market. What they really need is a true partner who can provide training, processes and the ability to bring the change needed to their organization to sell those products in today’s market.

There is a shift taking place in the dealerships that survived the downturn. Dealers can no longer afford to have an untrained and unfocused F&I team presenting the products at their stores. Why not take a leadership role? The gentlemen who provided the insights listed above know that the agent segement will see record growth in 2012 and beyond. In other words, our best days are still ahead of us. Let’s help our industry change to see unprecedented growth and profits!

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House Approves Compromise for GM, Chrysler Dealers


The House has approved a compromise plan to give General Motors and Chrysler dealers an appeals process to keep their showrooms open, reported The Associated Press.

A $1.1 trillion spending bill approved Thursday includes provisions to give 789 Chrysler dealers closed in June and more than 1,350 GM dealers expected to be shut down next year an opportunity to challenge the automakers’ decisions.

GM and Chrysler have attempted to shed dealerships as part of their government-led bankruptcies. But the moves have riled up members of Congress, who have received numerous complaints from dealers being shut down.

“We need to make sure that the companies give a fair consideration to dealers that have put a lot of their time, sometimes generations, money, effort and talent into building their dealerships,” said House Majority Leader Steny Hoyer, D-Md.

General Motors Co. and Chrysler Group LLC said last week they would reconsider decisions to close the dealers as part of a compromise plan including face-to-face reviews with dealerships and binding arbitration for dealers who challenge the decisions.

But dealers and key lawmakers pushed back, saying the GM and Chrysler approaches wouldn’t do enough. The compromise developed by Hoyer and Dick Durbin of Illinois, the Senate majority whip, requires the arbitration panels to consider a number of circumstances, giving some car dealerships a better chance of surviving.

The arbiter would weigh issues such as the economic interests of the terminated dealer, the company and the public, the dealer’s profitability during the past four years and conditions that could have led to a poor sales performance, including natural disasters and a poor local economy.

“We do not want to hurt the auto manufacturers in their restructuring efforts moving forward, but auto dealers are a big part of our local communities and national economy, and they should be treated fairly,” said Rep. Dan Maffei, D-N.Y.

The spending plan needs to be approved by the Senate. Durbin said he does not expect the dealer provisions to be changed.

GM is working on a “resolution that balances the interests of GM and its dealers,” the company said in a statement.

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