Scout, Honda, and other automakers are ready to cut out the middleman and move to direct online sales, but the NADA is putting up a fight
- A new report highlights how dealers are worried about direct-to-consumer sales.
- Rather than let customers choose, they want to stop direct sales altogether.
- Ultimately, it looks like dealers created the need for direct sales on their own.
The automotive industry is no stranger to change, but for Marc White, the future seems particularly uncertain. White is planning to pass down his Volkswagen dealership network to his son, just as his father did for him. But there’s one thing keeping him up at night: the rise of a direct-to-consumer sales model.
That’s why he recently testified at a state legislature hearing, warning that if automakers start selling directly to customers, his 150 employees could soon be out of jobs.
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Why would dealers be afraid of a free market where consumers can pick where they buy their cars from? According to at least one estimate, the dealership industry raked in $627 billion last year. Naturally, it doesn’t want that pipeline of cash to dry up, but that might not stop it from happening anyway.
To try and stop it, dealer groups are suing or threatening legal action against brands like Scout and Honda, which are planning to skip dealerships and sell directly to consumers, allowing you to reserve your car online from anywhere.
Dealers Not Exactly Thrilled With The Free Market
“Dealers don’t want direct sales to happen, because they have no interest in letting that dam break,” says Alexander Edwards, president of San Diego-based Strategic Vision to Bloomberg. “They want to keep their money flowing.” Speaking of direct sales and White, he’s one of the people lobbying against a bipartisan bill that would allow Scout to sell cars in South Carolina.
“It should be that you can buy a vehicle in minutes on your sofa,” says Cody Thacker, Scout’s vice president for commercial operations. “It all should be as easy as buying a T-shirt on Amazon.” For customers of brands like Tesla and Rivian, that’s exactly what the process is like right now.
The Case Against Dealerships
One executive at Edmunds, Dave Robinson, who bought a Tesla Cybertruck last summer and appreciated the ease and transparent pricing of buying online, put it this way: “I liked not having to spend half my Saturday in a dealership, feeling like the salespeople were talking to the Wizard of Oz behind the curtain while I waited in the finance office,” he told Bloomberg. “Never again am I setting foot in a dealership.”
Nevertheless, not everyone wants the dealership model to disappear altogether. Having the chance to take test drives, see a vehicle in person, and get more information from an expert is important to some buyers. Of course, there’s no reason automakers can’t just do that for themselves. Tesla has proven that it can build enough showrooms to satisfy customers. On top of that, it’s managed to get its service experience mostly figured out too.
Rivian has 48 showrooms and while it’s still struggling with service, it’s nonetheless selling cars. Scout plans to open 25 locations across 16 major markets when it begins deliveries. All of this is just to say that neither automakers nor customers actually need dealers. And the wildest part about all of this is that they basically did this to themselves.
A Downfall Of Their Own Making
For years, dealer groups have lobbied to restrict free markets with regard to cars and have done what they can to stifle laws that prevent them from duping customers too. Rather than making their pricing transparent, simple, and free from junk fees, they’ve stuck to their crafty ways.
In January, the National Auto Dealers Association won a case in court to stop stricter regulation that was meant to make pricing more transparent and could’ve saved consumers billions of dollars. Instead, car buyers are still at the mercy of dealers and shady tactics that we’ve reported on time and time again. Direct-to-consumer sales will solve that problem. And while the NADA may have won the aforementioned case, it’s clear that the writing’s on the wall: you simply can’t fight the future…
