First, Kill All the Dealers*

One sector of the automotive industry is a significant impediment to the evolution toward a safer and more equitable transportation network: new car dealers.?No single sector of the market is more invested in current business models and ways of doing business than are dealers and these “old” ways are getting in the way of progress.

The problem, chronic as it is, is only getting worse with steady industry consolidation.?As dealer groups become larger and more dominant in local markets, the incentives for finding customer-pleasing innovative solutions and evolving digital processes are vanishing.?This puts consumers at a deepening disadvantage, especially in a market characterized by component and vehicle shortages combining to drive up average transaction prices and dealer profits.

How are dealers impeding progress??Let me count the ways:

1.????Clinging to outmoded, inefficient, unfair, and customer unfriendly franchise laws that protect existing dealer agreements preventing legacy auto makers from selling cars directly to consumers and shackling consumers to whatever dealer or dealers happen to be operating nearby – good, bad, or, more likely, indifferent (to customer needs)

2.????Jacking up prices on in-demand EVs to capture a share of tax credit incentives

3.????Burdening the purchasing process with an ocean of paperwork – anyone who has purchased directly or via an app knows there ARE easier ways to obtain a vehicle.?(Primarily doing so in order to continue to collect titling and registration fees – thereby preventing the streamlining and digitization of the vehicle purchasing process now under way in states such as West Virginia with the help of Carvana.)

4.????Opposing the use of over-the-air software updates

5.????Serving customers with outdated, outmoded hardware and software systems and services

6.????Misleading customers

7.????Failing to explain features and functions of the car clearly

8. Failing to disclose financing options, terms, and conditions

9. Tacking unnecessary and generally worthless items onto the vehicle purchase

10. Lacking an understanding of the varying value propositions between electric and internal combustion engine vehicles

Everyone has a tale of woe to tell about their latest new (or used) car purchase.?It’s a process that is a cross between getting married (good) and a hostage crisis (horrible) – and one that can take hours.

A big complaint is the connection between dealers and the aftermarket.?In this respect dealers are in cahoots with the auto makers themselves.?It is in the dealer’s and the car maker’s interest that customers occasionally crash or damage their cars – because there are billions to be made in repairing or replacing those cars. In essence, dealers are not invested in fostering safe driving.

Dealers are exclusively invested in selling and leasing cars and, yes, servicing cars.?They are less interested in sharing or renting cars or promoting the concept of car subscriptions.

Dealers are also poorly equipped to explain connected car technology or safety systems (with some exceptions) – thereby contributing to the challenge facing the industry in promoting both connectivity and safety tech.?In fact, dealers arguably benefit from cars either lacking safety systems – or selling to consumers who don’t understand how safety systems work.?Dealers benefit from all those car crashes that require repair or replacement of the vehicle. (Worth noting that Tesla - lacking a dealer network - has no interest in enabling its cars to crash - quite the contrary.)

Making matters worse is the forementioned consolidation of the automotive retail industry.?Some of the positive aspects of car dealers – being active in the local community and nurturing long-term customer relationships – are falling away in the face of this ongoing maybe even accelerating industry consolidation.

Fewer and larger new car dealerships undermine customer bargaining power and mitigate local community engagement.?Family-owned dealerships with close community ties are increasingly a thing of the past.?Larger, corporate owners tend to become more focused on the bottom line than on customer care – and community engagement is often the first casualty.?(There are exceptions.)

The onset of electrification is exposing all of the weaknesses of the dealer distribution model.?With some notable exceptions, dealers are missing the boat on taking seriously the electrification opportunity to educate consumers regarding the range of decisions and behavioral changes associated with the care and feeding of an EV.

Customers have questions regarding charging timing, frequency, and location; the efficacy of installing a home charger – and which one and why; the relevance or inappropriateness of home energy storage; whether or not to add solar; or the ability of local energy providers to support bidirectional charging.?Most dealers are still shrugging their shoulders on these questions, rather than seizing the opportunity for a deeper customer engagement.

A lot is being asked of dealers, but the opportunity to make money has never been better with vehicle supplies limited by compromised supply chains sending average transaction prices skyward along with interest rates and profits.?Public retailers are reporting impressive profits on new car sales – which suggest that the time to re-invest in dealer and customer education has arrived but is being widely ignored.

Meanwhile, customers have more transportation options than they have ever had and car ownership is in the crosshairs.?It is interesting to me to see large corporate dealerships continuing to buy up smaller independent operators even as potential car buyers are arriving on car lots with less and less enthusiasm regarding car ownership.

Loosening up or doing away with dealer franchise laws in the U.S. would open some eyes and open up the market for new cars.?Such a move would be an extremely customer-friendly gesture and force dealers to compete and, more importantly, innovate to capture and retain customers.

Could such a monumental change in market structure occur under a president who is the son of a new car dealer??Perhaps not.?But President Biden likely knows better than most how popular such a decision would be among consumers and a potential shot in the arm for direct sales of EVs – which appears to be something he does care about.

*Apoligies to Shakespeare.