The Squeeze is On!!!

The Squeeze is On!!!

Like many of you, I struggle with the current situation within the auto industry and many of the dealers. I understand that it has been a difficult road for the last 18-24 months but it has been difficult for all businesses. What business hasn’t struggled? My issue deals with “ADM” and companies built on integrity charging an “Additional Dealer Markup” because the supply situation allows them this opportunity. If not adding an “ADM” they will disguise it as a “Dealer Add On - (ADO)”.?

Really, a Dealer Add On - why???? If vendors knew what customers wanted, why wouldn’t they pre-make it that way? For simplicity, let’s just break it down to any ice cream store. Of course, the dollar amount is not the same, but the principle is identical. Why are there 30+ toppings? It’s because consumers all have different tastes and preferences. Stop pretending that you know what the consumer wants and just sell a car like the good old days. You already have highly trained closers in the Credit Department that know how to sell additional products - let the consumer pick what they want.

Why is it that companies, that have built such incredible reputations, are adding these ADM and ADO mark-ups above manufacturers’ MSRPs? How does a business shift its philosophy so quickly that it is now considered appropriate when selling at MSRP was previously perceived as customer gouging? It can’t be greed because so many of these dealers are led by incredible individuals.

In most business situations, as with our construction industry, added costs are passed along to the consumers at that cost. However, this is not the case in the automotive industry - many dealers are simply adding money because they can.

The conclusion I’ve reached is disturbing to me. I believe that the simple economics of supply and demand has created such a windfall that many dealers are willing to take the social media hit and improve their bottom line. Don’t get me wrong, it’s not all dealers, but it is a very large percentage of them. Kudos to those who refuse to add an “ADM” as that’s the right thing to do!

How is human behavior altered so easily by business models that have existed for decades?

Historically, 5% off MSRP was still considered a high price and now a $5,000, $10,000, $15,000, $20,000, and even higher ADM doesn’t cause a dealer to blink an eye? Do they see this as the last hoorah before physical dealerships become service providers and selling reverts back to manufacturers directly?

What other product can you think of that has created a similar 180-degree shift in thinking? Why is this only happening in one industry and not being replicated in others? The squeeze is on, and it ain’t orange juice. Quite frankly, I do not understand as the end result is that customers will migrate to those who don’t charge an “ADM '' or “ADO” and will never return to those dealers who do. This new dealer business model defies logic.

I welcome your input as I think this will be a business case study ten (10) years from now in all the MBA programs across the country.

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Craig Klein

provide a best-in-class fiber network to internet service providers (ISPs) and other businesses across the United States.

2 年

Many thoughts 1. The industry has gone thru waves…right now the wave is pay more for now delivery or order like you want it and wait months. 2. The supply vs demand market will create pockets of sub markets. Ford Maverick sold out for initial 2023 build in days. 3 Toyota RAV4 Prime. Can’t build fast enough. 4. Why should any market be different, when demand exceeds supply most go up in price. Housing mkt, stock mkt, etc. 5. Consumers speak with the pocketbook 6. I pay Mrsp max and I don’t want add ons, so I order the vehicle and wait. FYI I agree I don’t like add ons regardless of what they are called. They have been in the automobile business for ever to increase arpu.

Benny Fisher

Leading with love and authenticity to inspire people to find their true purpose!

2 年

They will all be closed in 5-10 years as we know it. They don’t care anymore.

回复
Steve Cooper

Sales Consultant

2 年

Greed & transactional thinking vs relational mindset. ??

Felix Frydberg / Recruiter

Houston-Based Legal & Accounting Recruiter | Connecting Top Talent with Exceptional Companies ?? Million Dollar Producer/ CEO Club 2024

2 年

You are correct Brad Beldon and the real problem is that the auto business is one of the biggest contributors to inflation. The challenge is they consumers continue to pay these added costs without complaint. Thanks for taking awareness on this topic!

Brad Beldon

Chief Culture Officer & CEO at BELDON Roofing Company

2 年

Jim Farley & Joost de Vries - I welcome your thoughts, as well as both of you, are highly respected within the industry. This shift defies logic. If the new car sale creates service work for the next 5+ years, why push the customer away to make a quick buck?

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