Dealers Rush to Prevent Direct Sales, But Can They Halt the Unavoidable Transition? | Carscoops

      Scout, Honda, and other automakers are preparing to eliminate intermediaries and transition to direct online sales, but the NADA is resisting this shift.

      A recent report reveals that dealers are concerned about direct-to-consumer sales. Instead of allowing customers to make their own choices, they seek to prevent direct sales entirely. Ultimately, it appears that dealers have contributed to the necessity for direct sales themselves.

      The automotive sector frequently undergoes transformation, but for Marc White, the outlook appears especially precarious. White is gearing up to pass his Volkswagen dealership network to his son, just as his own father did for him. However, one issue is causing him great anxiety: the emergence of a direct-to-consumer sales model.

      This concern led him to testify at a state legislative hearing, cautioning that if automakers commence direct sales to customers, his 150 employees might soon face job loss.

      Why would dealers fear a free market where consumers have the freedom to choose where to purchase their vehicles? According to at least one estimate, the dealership industry generated $627 billion last year. Unsurprisingly, it wants to preserve that revenue stream, yet it may not be able to prevent a shift.

      In an effort to halt this transition, dealer groups are filing lawsuits or threatening legal action against brands like Scout and Honda, which intend to bypass dealerships and sell directly to consumers, allowing car reservations to be made online from any location.

      Dealers are not exactly enthusiastic about the free market.

      "Dealers are opposed to direct sales because they have no desire to let that dam burst," explains Alexander Edwards, president of San Diego-based Strategic Vision, to Bloomberg. "They want to maintain their revenue." Referring to direct sales, White is among those lobbying against a bipartisan bill that would permit Scout to sell vehicles in South Carolina.

      Cody Thacker, Scout’s vice president for commercial operations, remarked, “Purchasing a vehicle should take just minutes from your couch. It should be as simple as buying a T-shirt on Amazon.” For customers of brands like Tesla and Rivian, that is currently how the process works.

      Many argue against the dealership model.

      Dave Robinson, an executive at Edmunds who bought a Tesla Cybertruck last summer, noted the convenience and clear pricing of online purchasing: “I appreciated not spending half my Saturday at a dealership, feeling like the sales representatives were in league with some hidden agenda while I waited in the finance office,” he told Bloomberg. “I won’t set foot in a dealership again.”

      However, not everyone wants to see dealerships disappear entirely. Some buyers value the opportunity to test drive vehicles, view them in person, and receive detailed information from experts. Yet, there’s no reason that automakers cannot provide these services themselves. Tesla has demonstrated that it can establish sufficient showrooms to meet customer needs and has largely resolved its service issues.

      Rivian boasts 48 showrooms and while it still faces challenges with service, it continues to sell cars. Scout plans to open 25 locations across 16 key markets when it begins deliveries. This indicates that neither automakers nor customers truly need dealers. Intriguingly, the situation is largely a result of the dealers’ own actions.

      Their Decline is Self-Inflicted

      For years, dealer groups have lobbied to limit free markets regarding cars and have attempted to suppress regulations that would prevent deceptive practices. Instead of making their pricing straightforward and devoid of hidden fees, they have persisted in their manipulative tactics.

      In January, the National Auto Dealers Association achieved a legal victory to prevent stricter regulations that aimed to enhance pricing transparency and could have saved consumers billions. As a result, car buyers remain vulnerable to the dealers' often questionable practices. Direct-to-consumer sales would address this issue. Although the NADA may have won that particular case, it is evident that the future cannot be resisted.