Car dealerships are doing their best to ensure their demise, at least those with Ford and General Motors. This is what happens when people do not see the writing on the wall.
Technology has a way of changing things. This is where we see massive disruption entering. Sadly, greed often gets in the way of things.
The last few years were incredible for car dealerships. Due to the limit in supply, they were able to add huge mark ups to the price. There are many instances where they were charging $25K-$30K above MSRP.
This is a situation that causing more problems as people are facing difficulty in making payments and seek to get into something less expensive. The challenge is they are so far upside down on the loan, it is impossible to do anything.
Greed
As stated, the dealerships were able to clean up. Things have changed greatly.
Now that supplies are starting to roll out, the ability to simply ask for one's price is becoming more difficult. This could be further enhanced if the economy enters recession. Here we see where things can get very difficult.
General Motors has a fine solution for this.
Mary Barra, the CEO of GM, has stated that the company would reduce the production of pick up trucks to enable dealers to maintain their pricing.
Here is where we see the dedication. The dealers are more important than customers.
Then we have the behavior of the dealerships themselves. Here is an interesting video comparing a Toyota dealership as compared to the others.
As we can see, Toyota is moving their trucks while the others have them stacking up. Looking at the price they are charging, we can see why.
The bottom line is car dealers have enjoyed protection for a long time yet there is a new paradigm taking place. This will help to ensure their demise.
Direct Model
We covered this in the past. Companies such as Tesla are starting to usher in a direct model. While some question whether this can work, it appears that, over time, service centers can replace the dealership model. Sales and service can be broken apart.
Focusing upon pickups, legacy automotive still has the advantage. At this moment, Rivian is in the market but that is it. Tesla is going to bring out its Cybertruck later this year. Many question whether that will be a success.
The problem is that it does bring another competitor into the market. Ford has the F-150 Lightning which they are slow to scale production.
What we are looking at is the fact newer players will be entering the market with the direct sales model. As stated in other articles, even if Tesla rolls out 500K Cybertrucks per year, this will put a serious dent in the sales within the United States. All of these will come at the expense of dealerships.
Retail Is Changing
We saw the impact Amazon had upon shopping malls. Obviously, we know buying a car or truck is much different than a new television. However, there was a time when people never thought the Internet would take over as the major retailer.
Tesla is proving that, even in the early days, this model can be successful. We will have to see how it scales of course. Can the company deliver 5M-7M vehicles in this manner? That is going to be the test.
People are getting accustomed to direct models. As service centers open up, this provides opportunity for test drives. In other words, we can see the sales and service model altered.
It might be difficult to envision life without car dealerships. However, there was a time we thought the idea of shopping malls closing was unrealistic too.
That changed in roughly a decade. We could see the same thing with dealerships.
If you found this article informative, please give an upvote and rehive.
gif by @doze
logo by @st8z