
How Tesla is Circumventing Dealerships - bmahmood
http://autos.yahoo.com/blogs/motoramic/tesla-plans-short-circuit-car-dealers-194619627.html
======
BryanB55
As an auto enthusiasts I absolutely love this idea. I recently purchased a new
speciality car last year (2012 Jeep SRT8) and I must of said at least 10 times
during the process that I wish there was a way to circumvent the dealer.
Dealing with car dealers is one of the most fundamentally broken experiences I
have ever witnessed.

Ready to drop $65k on a new vehicle I walk into a dealer and the first thing
that happens is the sales man walks me to a desk, pulls out a piece of paper
and starts asking questions and writing "whats your name?, how much do you
want to spend per month?, what is credit like?, we can offer you really great
financing." I had to interrupt him to explain that I just wanted to have a
normal conversation first to even see if he could get the car. Turns out they
couldn't.

After many other slimy conversations with car dealers (and being hassled in
the parking lot before I even walked in the door) I finally found a dealer
that was willing to special order the car I wanted at the price I wanted. I
waited 4 months for the car and 2 weeks before it was ready to arrive a the
dealer they called to tell me they didn't want to sell it to me for that price
anymore and they were going to sell it for $10,000 over MSRP. Long story
short, I had to threaten legal action just to be able to buy the car that I
had put a deposit on and waited for 4 months for.

This is not the first terrible experience I have had with buying cars. The
"car sales man" attitude is fundamentally wrong. About 80% of the sales people
that I talked to at dealerships did not even know about the car I wanted to
buy, mentioned the wrong engine or did not even know it existed.

I'm waiting for the day that I can just click "buy now" online and purchase a
car with Zappos-like customer support at one fair, up front, low price without
all the bullshit in between.

~~~
andrewl
Agreed. And check out Edmunds' account of what goes on behind the scenes in a
car dealership by a writer who went undercover as a salesman:

[http://www.edmunds.com/car-buying/confessions-of-a-car-
sales...](http://www.edmunds.com/car-buying/confessions-of-a-car-
salesman.html)

~~~
ams6110
All this moaning about how scummy and awful dealerships are... just don't buy
a car there. First and foremost buying a brand new car is a stupid idea from a
financial perspective, the depreciation is greatest in the first few years.
Buy a used car from a private seller, or if you feel you must have a dealer
involved go to a fairly low-scum-factor place like Carmax.

All that aside, I love Tesla's direct sales idea. It is disruptive, but I
would think a few forward-thinking states are going to allow it (or not stand
in the way of it), and people who want to buy a Tesla direct will just arrange
road trips there to pick up their cars. Eventually word will spread, public
demand will build, and the political barriers will fall elsewhere.

~~~
dsrguru
Buying a new car isn't necessarily a stupid idea from a financial perspective.
It's true that cars depreciate in value at a ridiculous rate (which starts the
moment you drive off from the dealership), but buying from a private seller
means you have no way to tell if the car has been maintained properly. I've
heard that a decent number of car owners don't even get oil changes on time.
Is it worth saving, say, 30% up front but risking that the car will drop dead
at any moment? Maybe yes and maybe no. It depends on how reliable you need the
car to be.

~~~
mc32
Here's an interesting article from consumer reports which looks into the cost
of car ownership. [http://www.consumerreports.org/cro/2012/06/what-that-car-
rea...](http://www.consumerreports.org/cro/2012/06/what-that-car-really-costs-
to-own/index.htm)

This graphic (from CR) shows how depreciation accounts for most of the cost of
owning a car, over time. <http://imgur.com/wrOQu>

------
grandalf
Getting a car dealership franchise in the US is like winning the lottery.
There are so many barriers to entry that the dealer is pretty much guaranteed
to earn $500K to $1M per year if he/she has halfway decent management skills.

Further, the credit crunch a few years ago would have wiped out enough of the
US Auto industry to put a lot more dealers out of business. The rebate bill
that was passed was a _massive_ handout to US auto dealers. All those people
making $500K to $1m per year owning dealerships are essentially on welfare.

If more of the industry has been allowed to restructure after the credit
crunch, Tesla would not have to worry as much about a legal battle. The public
would rightly view Tesla as offering an innovative approach that will benefit
consumers.

The worst part of it is that the reason the automotive OEMs tried to sell
directly a few years ago was to put an end to predatory practices (dishonesty,
etc.) by auto dealers. There is no reason car dealerships should quote a price
and engage in haggling, etc. Many customers (particularly the elderly and the
poor) are the direct victims of these practices, and they are supported by the
Federal laws that prop up auto dealers.

~~~
akjj
The US auto industry _was_ restructured by the government and dealerships
_were_ closed. The first link I found with numbers for both said that Chrysler
closed 789 out of 3200 of its dealers and GM closed 2600 out of 6246 [1].

[1] [http://www.nakedcapitalism.com/2009/05/how-is-chrysler-
close...](http://www.nakedcapitalism.com/2009/05/how-is-chrysler-close-
dealerships-not.html)

~~~
grandalf
Compare that to how many would have closed without the massive handout.

Chrysler was able to force some to close by holding over the dealer
organizations' heads the threat that the government would not do the bailout
and _all_ Chrysler dealers would go away.

Unlike a market-based failure, the government-led restructuring was surely not
done fairly and likely some reputable and honest owners were penalized for not
being more politically connected.

~~~
saithier
To be fair, _all_ of them would have closed without the massive government
bailout.

If the American auto industry had totally collapsed, there wouldn't have been
any cars to sell.

~~~
anamax
> To be fair, _all_ of them would have closed without the massive government
> bailout.

There was at least one offer to buy Chrysler (from Penske). I'd be surprised
if there weren't any offers to buy GM.

Of course, those offers involved real bankruptcy. The resulting companies
wouldn't have kept the UAW contracts and pension obligations and they wouldn't
have been able to keep the tax-loss carry-forwards either.

They'd have kept dealers based (more) on economics instead of political pull.

And, the bond holders would have gotten their cut first.

GM makes sense at the right expense point.

~~~
mudetroit
I believe the Penske bid was actually to buy the Saturn brand from GM, not
Chrysler. Could be wrong, but buying a company the size of GM at the time of
the bailout would still have been a very difficult proposition.

~~~
anamax
> I believe the Penske bid was actually to buy the Saturn brand from GM,

Okay.

> buying a company the size of GM at the time of the bailout would still have
> been a very difficult proposition.

As you point out above, GM could have been sold in parts. (Some of the brands
and models are independent of the rest.)

Basically it would have been a no-reserve auction with the money going to the
bondholders. (They'd have taken a loss, but wouldn't have lost everything.)
The winning bid is based on what folks are willing to pay, not what someone
thinks GM is worth, book value, etc.

There's actually a lot of money available for such deals. Yes, 10s of billions
and hundreds for "special" deals.

------
encoderer
That's interesting. I've had the fantastic experience of buying directly from
an automaker as part of their European Delivery program.

Basically, you fly over there, show up at the factory, you get treated like a
dignitary, they show you "baby pictures" of your car being built, and then you
drive off with it and get to cruise around Europe for 30 days. When you're
done, you drop the car off at one of a half dozen ports and fly home. Your car
arrives a few weeks later.

You get about 10-15% discount and it's a very cool experience. A friend did
this for Porsche and while the car was great he said the experience was a
little lacking. That they do such lower volume they didn't have the program as
perfected and it was more about just showing up and taking possession of the
car.

Anyway, that's obviously not what Tesla is doing -- but they should. They
should definitely have a California Delivery program. They probably already
do.

~~~
daeken
Wow, that sounds amazing. Which manufacturer did you do this with? If you're
in the US, were the import tariffs and the odd environmental regulations a
problem? I assume they can just make you a "US model".

~~~
joezydeco
BMW is most known for their European Delivery program. The car you're
purchasing is a model made for the US market, you're just picking up your
order at the factory instead of the dealership.

In fact, once BMW ships it to the states you normally pick it up at the
dealership anyway. I believe some eager beavers pick it up at the New Jersey
dock but I think most wait until the car is delivered and titled in your home
state (and any shipping damage is discovered/rectified).

~~~
retroafroman
BMW will also let you pick up your car at their plant in South Carolina. They
make the X3, X5, and X6 there, but also have a performance center with a track
and instructors. You can also order in, say an M5, which they deliver there,
then they'll let you drive an identical car on their track with an instructor,
so not as to work your own so hard. They've done well with making it an
experience worth aspiring to.

Also, there is a recommended break in period on the new engines, precluding
you from going above 6k RPM, IIRC. Still, if you did a European delivery, it'd
probably be very possible to legally drive 100+ MPH on the Autobahn.

~~~
brc
>Still, if you did a European delivery, it'd probably be very possible to
legally drive 100+ MPH on the Autobahn.

No, not 'probably very possible' - it's entirely legal to do 155mph+ on the
Autobahn. There's one heading straight out of Munich. (most German cars except
Porsche are limited to 155)

Still, running in the car first might be a good idea.

~~~
joezydeco
I guess the real question is if you can get a BMW to 100 MPH without ever
going over 6K RPM. I'm guessing you can. =) I was certainly able to do it in a
rental crackerbox Opel.

~~~
brc
Yes you can. I have photographic evidence.

------
Shivetya
The money line is the statement where they believe there are no laws
preventing them from selling cars in all fifty states.

There are no laws "currently" is a better phrase. Should Tesla become a
serious maker of cars; having one model and a goal of only 35k a year keeps
them at the size of Porsche; then they are going to attract attention. That
they have received Federal money and their cars are subject to incentives by
the federal government and states will put pressure on legislatures to extract
"something" from them.

To put their sales goals into perspective, a luxury brand like Lexus can sell
over 20k a month. The top five sell a hundred thousand plus cars per month.
Chart of August sales is at
[http://www.autoblog.com/2012/09/04/august-2012-big-jumps-
edi...](http://www.autoblog.com/2012/09/04/august-2012-big-jumps-edition/)

~~~
btilly
As long as it is interstate commerce and Tesla maintains no business presence
in a state, that state government can't regulate.

~~~
stephengillie
Later, the article mentions how Tesla must put up service centers in some
states to be allowed to sell there. Doesn't that count as a business presence?

~~~
URSpider94
No, it's the other way around -- in some states, if Tesla puts up a factory
service center, then they must have a dealer's license.

~~~
stephengillie
_Tesla is adding service centers, which many states require for vehicles to be
sold there._

------
djt
This is excellent, i helped a friend go shopping for a car 2 weeks ago and it
was terrible. All the stereotypes of what car salesmen are like were out on
parade.

I also know a guy that sells cars and he managed to get a customer to pay
$2.5K over the price for a NEW car for the USED car... Same model and
accessories.

I'm glad that theyre pioneering this as I think it's going to be a viable
business model

~~~
chaostheory
Agreed. My personal experience at a dealer for both buying a car and a
servicing it are horrible. Hopefully more manufacturers start shifting to this
model.

------
rdl
I love everything Tesla is doing except the price of the vehicles, which will
come down in time with better battery tech and higher production volumes. I've
never gotten any value from a car dealer, and being able to do on-site support
for vehicles might actually be more efficient on the service front, too (with
Tesla locations in major markets like the Bay Area). They could just pay for a
rental car (like anyone buying a $100k Model S doesn't have another car...)
during the wait to send a team to Wyoming.

I wish Elon Musk would go into some kind of medicine/healthcare startup next,
after fixing cars and space.

~~~
Nevaeh
As someone who lost a few loved ones to cancer, I wished the same thing. It'd
be awesome if Elon tried to innovate healthcare.

But unfortunately, it is very unlikely according to what Elon said in an
interview: Source: [http://www.gq.com/news-politics/newsmakers/200901/elon-
musk-...](http://www.gq.com/news-politics/newsmakers/200901/elon-musk-paypal-
solar-power-electric-cars-space-travel)

\----------------------------------------------------

Elon: "It's important enough to be on the scale of life itself, and therefore
goes beyond the parochial concerns of humanity," Musk says of our
interplanetary destiny. "We're all focused on our little things that are of
concern to humanity itself. People think of curing AIDS or cancer as being
very important, and they are—within the context of humanity. But curing all
forms of cancer would improve the average life span by only two to three
years. That's it."

"In other words, while eradicating disease is a worthy pursuit, and would
extend the lives of individual human beings, my life's work is extending the
life span of life itself."

\----------------------------------------------------

Interesting to hear that coming from someone who has 5 kids.
[http://www.forbes.com/pictures/mkm45fjlie/elon-
musk-10/#gall...](http://www.forbes.com/pictures/mkm45fjlie/elon-
musk-10/#gallerycontent)

By the way, Elon did talk about some projects he would like to do if he had
the time. <http://www.youtube.com/watch?v=5FESP1h7IZM>

~~~
cincinnatus
What is 'interesting' about it? Having 5 kids fits perfectly with his stated
philosophy of improving our odds overall.

~~~
Nevaeh
Kids can get cancer too. If you had billions of dollars, and you lost someone
dear due to cancer, wouldn't you try to fix it?

------
dkhenry
Well someone rang the obvious bell on this one

""" "People don't necessarily enjoy that whole transaction," Blankenship says.
"If we can be in front of people on a day-to-day basis when they're not
thinking about buying a car…after a while, they'll drop back in again, in an
environment where there's no pressure. """

------
001sky
This article lacks one important piece of context:

 _The Roadster has a base price of US$109,000 in the United States, GB£86,950
in the United Kingdom, A$191,888 in Australia, and €84,000 in continental
Europe.[5]_

Yes, the showroom in Chelsea is "Cool". But its like any other Art gallery,
with _hot_ underpaid 23 year olds staring blankly at iMacs. Ie, its just
another _White Cube_. With a car parked inside.

~~~
whatusername
So the Australian Price works out to just over $195,000 USD. Go team AU!

~~~
brc
Taxes included in Australian price (using 109k USD base): \- Impport Duty @ 5%
: $5.5k \- GST @ 10% (on dutied price) : $11.5k \- Luxury car tax (any vehicle
over $59,000, on pre-GST price) @ 33% : $15k Total Tax, Dutied Price : $141k

That leaves 54k unaccounted for. This is cash straight into the back pocket of
Tesla. Shipping might be around $2000 per vehicle - assuming they pay 'full
freight'.

Similar figures apply to any premium brand - a $55k BMW will set you back
about $110k in Australia. It gets worse as you go up the scale - a Lamborghini
Avantador costs $379k in the USA, but $745k in Australia.

The reason this price gouging goes on is because there is a further regulation
that prevents parallell imports - you cannot import a vehicle (personally)
unless you have lived in the country of purchase for 12 months, and used the
vehicle for that entire period. It is also impossible in most states to
register a LHD vehicle under 30 years old.

These regulations prevent people from flying to SF (or London), ordering a new
RHD Tesla from the dealer there, and shipping it home on a boat. Thus they
hand Tesla (and other makers) the ability to gouge Australian buyers by 40,
50, 100k - whatever they think they can get away with.

All these regulations and taxes are created with the idea of protecting the
tiny local car industry - 224k cars made last year - but, to add insult to
injury, the government regularly gives the foreign-owned car makers (Toyota,
GM and Ford) cash payments to stay and keep producing.

So Australians get more expensive cars, and pay higher taxes so that global
car companies don't close the unprofitable operations.

The entire thing is a poster child for the damage bad regulations and policies
can cause.

EDIT : I also forgot about 'ADR' - which is Austalian design rules. These
force a manufacturer to re-do compliance testing for local rules, which,
although very similar to EU standards (and in some cases less stringent) -
require a manufacturer like Tesla to re-crash a vehicle and modify it in
insignificant ways. This raises the costs of bringing low-volume vehicles even
higher. There has been talk of adopting EU standards, but it has never gotten
anywhere.

~~~
lancewiggs
Meanwhile you can import into NZ for the price of the standard GST, 15% tax on
all goods. Type approval not an issue if approved in US/EU/Japan etc. As a
result only 64000 of the 150000 cars imported in 2011 were dealer new. The
rest were 2nd hand, 95% from Japan. The money saved to the economy is
staggering. Australia's import barriers add huge economic deadweight loss to
their economy. (I.e. they waste money)

~~~
brc
I was going to add that NZ dumped the idea of a local car industry in the
1980s and relaxed its car import laws. As a result the average car age is much
lower, and the average cost of a car is much lower - leaving large amounts of
disposable income for NZ residents to spend on other things (ie, not
Dealer/Manufacturer profit margins + Federal taxes). As you have shown - when
people can import a vehicle from anywhere they like, they do, and no doubt
that puts serious pressure on dealer + manufacturer margins and there would be
very little price gouging going on.

You should hear Toyota Australia go on about parallell imports - they condemn
the cars as unsafe - despite those cars being built in Toyota factories in
Japan. It is mind boggling.

Meanwhile, the last round of Federal Government 'assistance' (or co-
investment, as they now spin it) that was given to GM was mostly used for
redundancy payouts for factory staff.

Support for the regulation + taxation + duty protection for the Australian car
industry has bipartisan support - so it's not likely to go anywhere any time
soon.

------
incision
Sounds great.

FYI - Never, ever simply walk into a dealership for anything but a test drive.
You can avoid a lot of the car buying bullshit by getting your own financing
and dealing strictly with an "Internet Sales" department.

~~~
geogra4
Mind posting a link to a place with an 'Internet Sales' department?

~~~
001sky
<https://bankofamerica.truecar.com/main.html>

This. you can price, including out of state, etc. for in-demand models w/
price markups or inventory issues, this can be an eye opener. they e-mail you
an invoice. that locks in a price. the prices are pretty decent, and
benchmarked to invoice.

~~~
ScottWhigham
That link isn't working for me - "The Bank of America page you are trying to
reach is not available. We apologize for the inconvenience..." Have another
link?

~~~
aaron42net
That site will require that you are a Bank of America customer, though the
link is unfortunately broken. If you are an AMEX, USAA, PenFed, or Consumer
Reports customer instead, check out their respective car buying sites. They
are variations on the same program.

Alternatively, <https://www.truecar.com/> can be used by anyone, is mostly
using the same data and dealer network, but the prices might be slightly
higher.

(Disclaimer: I'm a TrueCar employee.)

------
lazyjones
Here in Austria, we already have some special "online only" deals by major car
manufacturers. I'd assume that it's becoming popular elsewhere as well
(example: <http://www.hyundai-shop.at/>) and that car dealers aren't
particularly happy about it. Perhaps the huge discount (around 25%) is the
usual dealer's cut ...

~~~
justincormack
I think that is less than the dealers cut, which has usually been 50%.

------
KeepTalking
About a year ago the new GM (post bail out) had talked about a partnership via
ebay. The basic premise being dealers can bid for your business. Not much has
been spoken since and I have never seen GM market the this concept actively.

I found a bunch of links that talk about that:
[http://www.theatlantic.com/business/archive/2009/08/why-
sell...](http://www.theatlantic.com/business/archive/2009/08/why-selling-gm-
cars-on-ebay-is-good-for-the-auto-industry/23004/)

I have a hunch a large part of retail sales in the post amazon economy( or
after best buy) will transition to this model. Large brands set up stores in
malls where you can touch and feel your product. You can then go online and
deal with the paper work/ordering.

it also surprises me the legality of forcing you to sell via dealerships has
not been challenged.

------
pnathan
> It's a key part of Tesla's overall business: Instead of building cars and
> selling them to dealers who hawk them to shoppers, Tesla wants to build only
> cars customers order — eliminating part of the auto industry's massive
> overhead costs in inventory.

This is a _key_ idea on the modern manufacturing floor. It is pretty much a
straight Toyota Way play. I'm guessing they are using a different name than
'kanban' though. :-)

~~~
brc
Every single BMW car that is built, is built to order. You can literally have
no two BMWs the same. The ones on dealer lots have been ordered by the
dealers, who have an idea on what combinations sell well.

I visited the factory in Munich and you can see a big line of doors, seats,
carpets, etc feeding up to the assembly line. Each is computer controlled, and
when the intended vehicle gets to the seat install station, the correct seat
(style, fabric, RHD/LHD) meets the correct car. When the doors arrive, they've
got the right interior bits already in them, and all the wiring loom bits
match up with what is already in the car, even if the prior 20 cars have all
had different options (color, trim, options, etc).

Meanwhile, at the back of the factory, JIT delivery trucks are delivering the
next set of seats/steering wheels/seatbelts etc - all barcoded, all ready to
be loaded onto the assembly lines in the correct order.

It's truly eye-opening to watch a highly automated factory like this in
operation. When a dealer in the USA presses the 'order' button - suppliers,
factory, workers - everything lines up and out pops a fully finished,
completely unique car.

------
patrickk
Is there any process for bring American-made cars into Europe tax-free?

Also, I've heard that you can get quite a deal on Japanese imported cars into
Europe if you know what you're doing. They've some strict regulations which
adds to the cost of owning a secondhand car, meaning that they look to sell
off cars quicker than other countries.

 _But there is another factor here that determines what you’re buying in the
secondhand car market: the notorious “shaken.” This consists of all the bits
of bureaucracy you need to keep your car on the road — weight tax, vehicle
inspection and compulsory insurance (car tax and more comprehensive insurance
coverage are separate). If you buy a new car, you have three years until you
need to jump through the hoops and start forking over cash. After that, you
have to do it every two years, and it can easily cost you over 100,000 yen
each time.

The end result of this is that people tend to sell their cars when the
“shaken” runs out. Dealers will usually arrange “shaken” so that potential
buyers have two years to go — a big selling point in the secondhand market.
The upshot of all this is that used cars will usually be available when they
are 3, 5, 7, 9, or 11 years old. So the first thing you want to check is the
length of “shaken” left._

[http://www.japantoday.com/category/lifestyle/view/buying-
a-u...](http://www.japantoday.com/category/lifestyle/view/buying-a-used-car-
in-japan-what-to-keep-in-mind)

Anyone have experience of importing Japanese cars to Europe?

~~~
pja
A relative did this with an MX-5 a few years ago. They went via a company who
managed the whole process, so they didn't have to deal with all the legal
issues themselves. They seem to have been very happy with it.

£400 / year just to keep a car on the road seems steep! But if it includes
insurance cover, then it's not really very different to the UK market which
has similar requirements (annual tax, annual inspection, minimum insurance
level). In the UK, you generally pay these yourself regardless of the age of
the car (except for the annual inspection which kicks in after three years,
but only costs £40). Interesting how the psychology of suddenly being faced
with the 'new' annual cost (which of course you've effectively prepaid for the
first few years as part of the purchase price of the car) nudges people into
getting rid of their cars instead of keeping them running.

------
programminggeek
This is probably the only way that longer term the company can afford to sell
electric cars at a reasonable price. The tech is obviously expensive, but if
you layer on the 10% sales commission and dealer fees, etc. it will jack up
the price on these already expensive vehicles by 25%.

Imagine how much better the Chevy Volt would sell if it were 25% cheaper...

------
adrianbg
Does anyone know what economic conditions cause a market to transition from
being car/house-like (no fixed price, annoying sales process) to what is
normal for cheaper products in first world countries (more-or-less fixed
prices, less aggressive selling)? Is it related to products'scarcity?

From my own experience I know that even products that normally have fixed
prices in the first world (cell phones, bikes, anything really) are sold more
like cars in a lot of developing countries where bartering is the norm. You
might find them available for drastically different prices even in the same
locale and it is frequently necessary to waste time and energy keeping track
of the going price for a particular product that you are considering buying.

~~~
cincinnatus
Maximal value extraction is probably the answer. If more profit can be made in
a given market/product combination through direct selling then this will be
the model, if a commodity approach extracts more value then it will prevail.
There should be a natural progression from the former to the latter as a
market matures and buyer sophistication increases. In the case of cars the
purchase is infrequent and specialized enough that the market has been slow to
mature in buyer sophistication.

Of course the buyers are uneven in their knowledge, so in the phone market you
have a range. Similarly in cars there is now an opportunity with a small
number of highly informed and opinionated consumers who find Tesla attractive.
(disclosure: I'm a happy shareholder)

------
at-fates-hands
This business model allows Tesla to be incredibly agile in a slow moving
marketplace.

With the current auto market, there is a lull between what consumers want and
the production facility. Remember when Ford was cranking out SUV's and then
the economy tanked, gas prices went through the roof and nobody wanted SUV's
anymore? Ford's plants were still producing SUV's and shipping them to dealers
who didn't want them and couldn't sell them. They were taking a huge loss on
every one of those Explorer's they produced.

Tesla's model allows them to change much faster to the needs of the consumer,
without wasting a lot of production costs and overhead. I think the time is
right for a huge disruption in this industry.

------
eli
They've had a showroom like this in DC for some time. I walk past it all the
time. I don't think I've ever seen a customer in there.

------
dman
Heres something that worked for me recently - walked into the dealership 15
minutes before closing time on the last day of the month after confirming on
their website that they had the color / accessories combination I was looking
at. I had a fairly good idea of what I wanted to pay, and they were eager to
close the deal and to go home, the whole deal including the test drive was
done in under 30 minutes.

------
vbl
I know this sounds nuts, but I have a business idea that might be suitable for
discussion in this thread.

The idea is to do away with the dealership for anything not related to the
actual transaction (they handle financing efficiently, etc.)

Instead, the system relies on individual agents who have parking lots of
different cars within a category and across brands. If I were a mid-size
specialist, I'd be very family-minded and feature the Accord, Altima, Impreza,
etc.

This would allow a customer to make one stop to cross-shop, and they get
highly specialized counsel without any (obvious) incentive to sell hard on a
certain brand.

The agent then hands off the buyer to the dealer with a fair price negotiated
(using various online tools) and the buyer just closes the deal. The agent
gets a cut of the sale Cars.com style.

Granted, it's not a highly scalable business, but it could be a worthy self-
employment idea (with the upfront capital to do it, or loaner cars from
dealerships), and the customer experience is vastly superior.

~~~
ChuckMcM
You've described the salient points of an auto broker.

~~~
MartinCron
I once used an auto broker to help me purchase a very specific used car and it
was probably the best used car buying experience I've ever had. Zero drama.
Very civilized. Maybe I could have saved a little bit of money by finding the
car myself and being a hardball negotiator, but there's a value in keeping the
part of your soul that dies when you interact with a car salesman.

------
sonnekki
I had a great experience buying my first car, a new-used car, from Enterprise
Car Sales, a branch of the car rental company. We were able to have a good
conversation, and I found that they are a "different" kind of car dealer
because they have fixed, no haggle prices for all of their cars.

They are, however, still a car dealer as customers are not able to buy the car
online, but they are able to pay to ship the car to the nearest Enterprise
dealer. Like every other dealer however, there is a surprising amount of
paperwork.

It wasn't entirely painless, but it was the closest to a pleasant experience
as I was comfortable with. I was not comfortable negotiating how much I lose
with a normal dealer.

I wish I could buy a Tesla vehicle now, but I don't have the money to do so,
and I don't want to be in debt for a long time.

~~~
magoon
> I found that they are a "different" kind of car dealer because they have
> fixed, no haggle prices for all of their cars.

I love this sales tactic -- tell the customer that your sticker prices are set
in stone as if it's some sort of benefit.

~~~
TimGebhardt
But there is a big benefit: you know what the price of the item is. If you
don't like it, don't buy it. Think about Apple gear: your gear-head computer
friends scoff and say "I'd never pay the Apple tax, they're not worth the
extra price".

More transparent pricing is always better for the consumer. It forces the
market to price their items more competitively.

Now imagine if everyone got their Apple at a different price based on the mood
that the Genius Bar guy was in that morning.

------
beefman
For those who don't know, Blankenship was a key architect of Apple retail
[http://www.teslamotors.com/about/press/releases/tesla-
hires-...](http://www.teslamotors.com/about/press/releases/tesla-hires-apple-
gap-veteran-revolutionize-car-buying-experience)

------
tocomment
How do test drives work in this model?

~~~
brc
Any high-demand cars are usually not available for test drives, unless you
know the dealer or someone with one.

It's not unheard of for people to have to purchase a car sight unseen, never
driven. Dealers may give you an 'out' - as in final delivery is subject to a
satisfactory test drive - but few people are going to knock back a car they've
been waiting months for.

~~~
cincinnatus
Indeed I purchased a Mercedes ML in 1997 having not even seen one on the road
yet, it was not out yet and 1998 was the first model year. Got one of the
first thousand off the assembly line with mixed results (used to call it the
'beta'). I will likely be buying a Tesla X without ever seeing one.

~~~
brc
"mixed results" boy, you're being kind.

They released way too early on that model - new model, new factory, first
consumer SUV for the brand.

You might have been lucky but they did have a lot of problems.

Ironically now they make an excellent used buy - like evolution, all of the
buggy ones have been crushed, and the ones that remain are the solid examples.
But their terrible reputation means they don't cost much at all.

Incidentally, my boss at the time bought one as well, and weirdly enough he
let me drive it on the first day he owned it. There is no freaking way I'd let
an employee drive my brand new car, but he seemed to think it was cool. Still
weirded out by that to this day.

~~~
cincinnatus
Yea I kind of which now I had kept the 98. It was working quite well by the
time I gave it up, but there were safety related upgrades on the new build
that caused me to switch.

------
lnanek2
It seems like they'd be in a whole lot more stores, and in front of a whole
lot more eyes, if they just worked with dealerships. It is a lot like how many
phones and other devices have attempted to get sold online without a lot of
success compared to something that is actually placed in Verizon and other
carriers' stores and sold to millions. Will they "lose" a ton of money if they
let these middlemen play? Sure, but they will sell a lot more too.

------
Zak
I wish Tesla luck in this. Laws mandating franchise car dealerships seem to be
fairly bad for consumers, and I can't think of any compelling government
interest in maintaining them. Maybe seeing a better model at work will help
them to go away.

------
vladoh
BMW also plans to sell the BMW i3 and i8 online:

[http://green.autoblog.com/2012/07/30/bmw-will-sell-first-
car...](http://green.autoblog.com/2012/07/30/bmw-will-sell-first-cars-online-
and-theyre-electric/)

------
jpswade
This is all very well until there's no dealerships that can service your
vehicle or stock the parts.

~~~
waterside81
I've looked into this with regards to Tesla (I'm on the fence about if I want
to buy one or not).

I'm in Toronto, they're opening up a dealership in a mall ("Yorkdale" for the
locals) and they have one service centre in each major city they operate in
(Vancouver, Montreal, Toronto). The sales person told me they plan on opening
more.

You pay $600 once a year for maintenance & service. Additionally, your car is
constantly phoning home to alert Tesla HQ if something looks awry.

