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Challenges Faced by Car Dealers in the Era of Direct Sales
Automotive retailers are facing a legislative battle as the automotive industry shifts towards direct sales of vehicles. The traditional franchise sales model, long-held by car dealers, is now under threat due to advancements in technology and changes in consumer preferences. Dealers are apprehensive about the implications of cutting out the middleman and selling vehicles directly to consumers, as it could potentially disrupt their established business practices.
Concerns of Car Dealers
Car dealers are deeply concerned about the potential loss of revenue streams associated with the traditional dealership model. They rely on tactics such as upselling unnecessary add-ons and financing options to maximize profits. Direct sales would eliminate the need for such practices and pose a significant threat to their bottom line.
Furthermore, dealers are worried about the upcoming release of new electric vehicles (EVs) by manufacturers like Sony Honda Mobility and VW. These vehicles are expected to challenge the existing dealership franchise system by bypassing traditional dealerships and selling directly to consumers.
Industry Response
In response to this shift, the Automotive Trade Association Executives took a proactive stance by placing a full-page ad in a prominent industry publication, Automotive News. The ad called for manufacturers to adhere to the established franchise model and refrain from selling new EV models like the Afeela and Scout outside of the traditional dealer network.
The ad underscored the importance of state laws that mandate the involvement of franchised dealers in new vehicle sales, emphasizing the legal implications of circumventing the existing distribution channels. It warned manufacturers of potential legal challenges and urged them to collaborate with franchised dealers for a successful sales strategy.
Despite the industry’s concerns, manufacturers like Sony and VW have remained silent on their sales strategies for upcoming EV models. This lack of transparency has fueled speculation and anxiety among dealers who fear being left out of the sales process.
Dealer Perspectives
“After two years of asking and getting nothing, frustration is very high,” remarked John Devlin, the chairman of the Automotive Trade Association Executives. He emphasized the challenges that manufacturers would face if they chose to sell vehicles directly, predicting a difficult legal battle ahead.
Geoffrey Pohanka, chairman of the National Automobile Dealers Association, expressed concerns about the potential exclusion of dealers from the sales process. He warned that manufacturers bypassing franchised dealers would face opposition from state and metro trade associations with the support of NADA.
While the future of direct vehicle sales remains uncertain, dealers are bracing themselves for a shift in the automotive retail landscape. The outcome of this legislative battle will determine the future of car sales and the role of dealerships in the evolving automotive industry.
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