NADA Chairman Takes Shots At Tesla’s Direct Sales Method

OCT 15 2015 BY MARK KANE 67

Tesla Model X

Tesla Model X

Tesla Store

Tesla Store

Bill Fox, chairman of the National Automobile Dealers Association, explained the reasons why he thinks dealers are superior to Tesla Motors’s direct sales concept following a speech he gave at the Automotive Press Association, in a piece presented by AutoGuide.

NADA Chairman listed several advantages:

“The first and foremost one is, we’re the face of the manufacturer in every small town in America. We’re the guy that hires the local people, we pay for the cars, we support the local economy.”

We are surprised that the above argument was considered as the most important, because in the direct sales model, the manufacturer also needs to hire local people for their stores and service centers, as well as electricians to keep the charging infrastructure running.

If there is a noted reduction of sales personnel, related to this increase of profits/reduction of costs to the consumers, it’s good news. Installing ATMs instead of bank employees is a similar scenario.

Fox aptly noted that in the franchise system, consumers have “a local person they can interact with instead of dialing a 1-800 number.”  And this is a valid reason, but comes at a premium to have such network (we’re not so sure all dealers will solve all the problems despite being close by, and we do know that not all dealers are liked). Moreover, a manufacturer the small size of Tesla can’t afford to have dealers/stores/services in every city anyways.

There is an important advantage to independent service centers, although NADA Chairman seems to draw the wrong conclusions.

“If you had a Tesla and it broke down, where would you get it fixed? What they have is a service facility somewhere. And they’ll come and pick up your car, leave you a loner car … In my judgment, that’s an inconvenience.” He also noted, “I don’t know that the American public is ever going to accept that version of car ownership,” especially with electric vehicles that have limited range.”

We believe that inconvenience is false, or in some cases isn’t a big problem. The problem could be that consumer has only one option to repair the car, without competition.

NADA Chairman doesn’t believe that consumer will be satisfied in the end with the direct sales model.

War between dealers and manufacturers with direct sales model (read Tesla) will continue as there is a lot of money to win or lose. According to Fox, the average profit for dealers is 2.2% and they collect 15% of all sales taxes in the U.S. (in 2014).  But as we know, the money is all in the service/repair and in the used section of the lot.

Source: AutoGuide.com

Categories: Tesla

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67 Comments on "NADA Chairman Takes Shots At Tesla’s Direct Sales Method"

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More importantly, the dealer network has shown resistance to innovation. Hybrids, Plugin Hybrids and EVs, resistance all along the way.

Saturn tried to deviate slightly from the dealer network script by using fixed pricing for their cars and options. People seemed to like a dealer where you didn’t need to negotiate the real and fair price of the car. There was more than just resistance to that innovation, and GM killed the Saturn model altogether.

Most of my friends LIKE to negotiate–not only at the car dealer, but the garage sales, etc.

The real problems with direct sales are:
* Amway like method used by Tesla, of using untrained owners acting as sales people and giving test rides, cuts into local employment.
* Manufacturer can hide problems with cars by avoiding recalls. Look at how many drive trains Tesla replaces at regular service appointments.
* Manufacturer can cut corners by refurbished and below standard parts (think Tesla’s refusbished drive units)
* Manufacturer’s employees could be working for their own bonus and undisclosed incentives known only to them. They may or many not be in the consumers’ best interest.

Obviously, NADA chairman couldn’t say all these in a public presentation.

He can’t say them, because all of these “speculative examples” you cite, are complete falsehoods– and he’d be legally liable for saying them.

You on the other hand, abuse blogs like this one, hoping for no such consequences as you blither on with such nonsense.

* It is not the job of any private company to create employment for the sake of creating employment
* Manufacturers hide problems with or without a dealer model. Look at the GM ignition issue. Look at VW. No more need be said.
* Again, manufacturers can cut corners with or without a dealer model. Dealers do not do forensic verification on the parts they get.
* Dealers’s employees could be working for their own bonus and undisclosed incentives known only to them. They may or many not be in the consumers’ best interest. I changed a single word here. Up and crosselling incentives are common at dealers and dealer service centers.

So basically you’ve got nothing here, and everybody knows it. There is a reason nobody likes dealers. At any rate, if the company store model is worse, the market shall punish Tesla. That’s what the market is for.

+10

“At any rate, if the company store model is worse, the market shall punish Tesla. That’s what the market is for.”

ROTFLOL! If market was always right, my house will be worth $2M, and Kenneth Lay and Bernie Madoff won’t be sitting in their prison cells. Neither would we need any of the consumer protection agencies.

It’s amazing, I’ll bet out in the world, you could almost pass for a normal person.

I wonder how many other sets of owners have held surprise parties for their dealership staff. Seems either T is doing something right, or putting Coolaid in the AC filter

??
Untrained owners? Me and my friends have all driven each other’s Mercs and Bmws before buying and test driving. So tesla isn’t the only one.
GM, Volkswagon, hides defects as well. Tanaka air bag anyone?
Besides IF dealership model is sooo good they have nothing to worry about! the FREE market will decide for everyone. The dealers don’t want us to decide for ourselves.

See Through. Do you even believe your own nonsense?

There are small truths in your points but they are completely ruined by the desperation in attacking Tesla. Tesla didn’t start the fight, it was NADA. NADA is the bully in this scenario and just like any bully, they are in the wrong. There is ample evidence to back this up. NADA is the bad guy in this fight and supporting their position puts you on the wrong side as well.

If you are a dealer or work at a dealership then you should be telling NADA to get off your side. NADA is harming you and your future business. They could have very early on made easy compromises with Tesla to allow them to sell direct while pushing for future integration into the dealership system. They didn’t. Instead they are fighting a desperate war that only shine a spotlight on the dealership system and the laws that protect them. Since the public already has a serious dislike of dealerships this will just get the general public to back Tesla. Which could escalate to allow other manufacturers to sell direct.

The dealers show much more than resistance to EVs, they cannot advocate EV sales or else they go bankrupt. Almost all their profits come from gouging customers on oil changes, tune ups, brakes etc which EVs either don’t need or need very little. A dealership selling mostly EV’s will have a huge drop in future profits.

Mr. Fox has an alternate view of the service provided by dealers than the rest of the world. The quality of customer service with a traditional dealership usually takes a 180 as soon as you sign the paperwork after you’ve reluctantly agreed to overpriced window tinting, VIN etching, and nitrogen filled tires. My experience with Tesla has been nothing but great so far. Let’s let consumers decide which model is better for them

Exactly. Stop trying to make everyone adhere to what NADA thinks is best for consumers, and allow them to vote with their hard-earned cash. I thought that’s what democracy was all about.

Middlemen are never about Democracy, just “business”.

Too true Eric.
Dealers are the problem, not the solution and EV’s needing so little repairs, covering a large area with a van, car hauler and mechanic, most things will be fixed in the driveway.
Or get a loaner.
The fact is this cuts 20% of buying a car by selling direct and that can go into better service, which Tesla’s is second to none, like it’s cars and lower cost which is why Teslas cost less than other large Lux Sport Sedans.
Which dealers won’t beat because they are too greedy.
I see a future with an EV so simple the owner can fix or replace any part in 30 minutes, most under 15 minutes, solving the repair problem, cost.
Only possible in an EV. KIS

I thought only the Tesla Model S D had a Ludicrous mode. Now I know that the NADA has it too, in Mr. Fox.

This is the NADA’s version of AutoPilot … just as Tesla upgrades a majority of the Model S fleet with a software update (direct to customer vehicles, without visit to an auto dealer).

No dealer supported auto manufacture has, or likely can deploy software upgrades directly to vehicle owners. This is due just as much to legal issues related to dealer and union contracts vs. not having a the technical expertise.

In other news, drug lords take shots at healthy lifestyle.

Businesses will always be against disruptions that directly affect their business plan.

+ 100

This demonstrates the difficulty of defending an indefensible position. These arguments fall flat on their face since everyone knows, I mean it, literally, everyone knows the car dealers are ripping you off.
Its an extra layer of complexity that merely adds cost with very little added value.

Nailed it.

“What they have is a service facility somewhere. And they’ll come and pick up your car, leave you a loner car …” vs driving to and waiting at a dealership I’ll take the loaner delivery to my home anytime.

99% of the dealers I’ve worked with know less about the cars in their own lots than I do. Which boggles my mind since they are there with the cars everyday.

I just need someone to show me the car, let me have a test drive and finish the paperwork, how does a franchise dealership do that any better than a showroom run by a manufacturer?

+1
A loaner is an inconvenience?
I wish my local dealer would give me a loaner when I take my Volt for service.

If you read Mr. Fox’s musings more closely you’ll see it’s not a “loaner” but a “loner”.
Much less convenient apparently.

Well, if the consumer will not be satisfied with the direct sales model, then why fight it? Let Tesla do its thing and watch them die.

May the best business model win, right?

Since NADA is fighting Tesla’s business model, to the point of fighting dirty by changing or misinterpreting state laws, then this average consumer suspects that NADA thinks the consumer actually likes it and is worried they’ll be obsolete.

electric-car-insider.com

+1 could not have said it better myself.

I hate car dealers. They always say that you can negotiate to get a lower price. That is dead wrong all the car dealers in my area have fixed princes and it’s mostly $5000 dollars more then in every other city.

CherylG'sDirtyLittleSecret

NADA = “Stealerships”

Not that I like Tesla or anything….because I don’t.

Funny, I find it inconvenient to have to take my car to a dealer and find someone to pick me up and drop me back once the repairs are done.
What he’s saying is that going to the cinema is more convenient than flicking on your TV to watch a movie?

The nerve, they want to bring a loaner car to me? I’d much rather sit in the dealer and drink bad coffee all day!

Oh, I wish I could afford one… 2002 Kia needs to make it to the III.

If dealerships are superior to direct sales, what are they afraid of? It should be dead easy to prove this supposed superiority to the consumer and thereby have their future secured!

New car dealers have a slightly better satisfaction rating than Congress. That’s not saying much. 🙁

“And they’ll come and pick up your car, leave you a loner car…” Terrible Inconvinience that level of service… If I had a dollar for every time my VW dealer DIDN’T do that for me, I would drive a Tesla by now… ;oP

Lets use reality here.

Since car dealers are rated (consistently) 2nd from the bottom and only one point better then politicians on honesty/ethics I think its fair to say that Bill Fox is a lying….!

Evidence shown here:
http://www.gallup.com/poll/1654/honesty-ethics-professions.aspx

I’m surprised clergy is rated so high…

And you know how dealers would market that poll?

“NADA and US Automotive dealers – America’s most trusted American institution”*

(small print) – *as determined by a recent Gallup poll comparing US auto dealers to all US governmental elected officers and candidates in terms of honesty, ethics and professionalism.

if Direct sales are so bad, why do you need laws against it? Certainly if introduced, direct sales would fail, as clearly no one wants it according to NADA.

Actually for me what really stands out is how low the ratings for business executives have fallen, even way under that of bankers.

They might want to try and change their image before they become focused on in the next election.

Dealers Are a “Milking Machine” They suck On Both utters…..the manufactures’ & the buyers’… Hence “Middle men” ….Not to mention all the Not Needed warantee repairs they “pretent” to do…..

I think you meant udders. The way you spelled it was udderly wrong.

Yes I did pardon my spelling …cheers

…and furthermore, you probably meant ‘teets’ as a cow has only one udder but four teets to suck on. 🙂

Mr. Fox is full of hogwash.

Not an argument for dealers, but I do think that, before the Model 3, Tesla needs to radically expand authorized service locations and to make Tesla parts, service manuals and service bulletins available to outsiders. Sure, I’d prefer to take the car to Tesla, but it would be nice to have local options for those of us not in a major metro area.

Only need to know one thing: the more middlemen, the higher the cost. The longer Tesla can keep non-value adding middlemen out of the mix, the better for the consumer.

Vito Corleone offered his statement of support for the auto stealerships dealerships:

“We’re the business that hires the local people, we provide protection for local businesses, we support the local economy. Really, there’s not much difference between the way they do business and we do business. In either case, you got no choice but to deal with us.

“And Tesla? They’ve got some nice stores. It would be too bad if somethin’ happened to them.”

Yeah, everybody pretty much said it here. If my car has a problem, I have to drive to the dealership (or ride with the tow truck, if it’s not driveable), and then get a loaner car there. That’s a pain in the rear. Having someone show up to wherever I was, and give me a loaner (a top-line version of my own car), that’s awesome. When you buy a car, you will pay sales tax no matter what. The sale tax argument makes absolutely no sense. And, as the article noted, Tesla still hires local people for the stores/galleries, service centers and supercharger construction/maintenance. The dealerships are screwed no matter what, because their bread-and-butter is service. My hybrid has less service needs than the regular ICE version of the same vehicle – fewer oil changes, don’t use brakes as much, etc. PHEVs have even longer maintenance cycles because they have significant amounts of all-electric driving and higher regen capacity. EVs reduce (or sometimes eliminate) all wear parts of a car, except for things that are used regardless of drivetrain: tires, windshield wipers, A/C, power windows, suspension and a pump (for liquid coolant). Dealers will have to increase markup in order… Read more »

…forgot power steering as a significant, universal potential point of failure.

Of course he’s complaining because Tesla’s way is better and he feels threatened

old hag

I consider myself part of the “American public” and I’ve seen Tesla’s service at work. It’s so far superior to the service I’ve received with my Chevrolet Volt that it’s not even a comparison. My friend’s Tesla 12v battery was bad and they sent out a car the same morning they called and told him it was going bad. He had no idea! Compare that to my dealer, who makes me drop it off, they pester me while I wait about “needing cars just like mine”, and give me crappy coffee. No thanks. I’ll take the Tesla model any day.

Oh, and I hate going to car dealerships with a dread only equaled by my dread of going to the dentist or calling my cable provider. I simply don’t know how they can compete, except to fight Tesla with lobbyists. Eventually, those rich lobbyists will want a Tesla.

You Must be a Mercedes owner they are the scariest of all!…. l o l …..They Itemize every move they make or don’t make , they mark it down & charge you $$$$ just like the thieving Lawyers do..

If NADA is so confident that dealerships provide customers with a superior service and value, then they shouldn’t be opposed to allowing direct sales into the market- because the free market would choose dealerships as the winner, right?

Nobody is proposing eliminating dealerships. Consumers just want a choice that isn’t artificially limited by the force of a corrupt government.

+1

DEALERSHIPS OR COMPANY RUN SERVICE DEPOTS , WILL NEED TO EMPLOY PEOPLE..NO-ONE LOOSES ….EXCEPT THE “FREE LOADING” DEALER PRINCIPLES , THE “PARASYTES” THAT GET ALL THE GLORY & THE FREE CUSHY RIDE ON THE WORKER’S BACKS!!!

Attending the Twin Cities (Minneapolis) Auto Show, I’ve heard people wondering why there isn’t a Tesla display. As long as the show is put on by the local chapter of the Auto Dealers Association, there is never going to be a Tesla display.

But you really need to get that true coat:

LOL….so freaking true on so many levels! 🙂

Fox, the NADA, and car dealerships have proven themselves to be catastrophically deaf to the concerns and desires of consumers for decades.

So asking what Fox thinks consumers want, is like asking Archie Bunker what women or minorities want.

“..And they’ll come and pick up your car, leave you a loner car … In my judgment, that’s an inconvenience.”

Because that’s so much better than calling a tow truck to transport your car to your dealership and waiting for your friend or spouse to pick you up, because they don’t offer loaners.

Really?

Long story short, if you enjoy dealing with a dealership, and all of its many ways to separate you from your hard earned money, go for it. You know in advance, that each desk is a “profit center”, designed to make profit for the dealership.

Serving you, and giving you what you want is just a sideline.

Car dealers are usually the WORST thing about buying a car. I mean many are cringe-inducing. A few are crooks.

Wait – do EV’s breakdown? My family owns seven EV’s for total of ~10+ car/years – and NOT ONE breakdown.

Yes, I would rather own a car that doesn’t break down. Over 4 years in my Leaf, never stranded, never needed anything beyond annual battery check, and change brake fluid and cabin air filter every other year. Oh… I guess I did have to rotate the tires every 9 months or so.

Don’t forget wiper blades! *grin*