I'd imagine during the last 18 months though, service has been helping dealers a lot as inventory of new and used vehicles has been light at best.

 

In speaking to a few friends who own Jaguar and Land Rover dealerships, no: the delay in parts means that repairs that used to to take one or two days now often takes weeks. So the amount of service they are doing is substantially less. You have to now wait weeks to get an appointment because of the dearth of replacement parks.

 

My local MB dealership is packed for service every time I have gone in there, so not sure I totally believe that. When I say service, I'm talking about scheduled maintenance not a major repair.

 

One of the reason dealers will be far and few in between in the future is the fact that electric cars needs very little maintenance, batteries, cabin filter or brakes, thats about it. Dealer profit is mostly generated from service, if EV cuts into that revenue, we will see less dealership and smaller dealerships. Eventually, car makers will absorb the dealerships, similar to the Tesla business model.

 

This is exactly what my friend who owns several dealerships says: repairs that usually take a day or two now takes weeks because of the shortage of spare parts. So cars remain at the dealership waiting for parts. This has substantially cut into their profits.

 

Major car makers will never absorb dealers. They are manufacturers and distributors of millions of cars. Retail business is an entirely different game. It becomes a real estate game with overhead and risk. The model works for smaller companies but for the GM's, Ford's and Toyota's of the world not efficient enough. They don't need it.

 

They do actually already own a number of dealerships, particularly in Europe. Not as common in the USA. Below are numbers I found for 2014. They are interested in selling at least some of them, but that trend may reverse if dealerships on their own are no longer profitable.

 

I do not think anyone has suggested that the OEM absorb dealers: In the past, distant past, manufacturers did not want the burden of selling cars: they wanted to manufacture cars and pass the burden of selling to the dealers who took on the risk of selling. To protect the dealers states instituted franchise laws which prevented the manufacturers from coming into states in direct competition with the dealers.

I originally ordered a Form Mustang MachE First Edition and for a myriad of reasons I decided not to take delivery: everything was done online. Never set foot in the dealer. Today Ford and other manufacturers are encouraging the pre-order rather than buy out of inventory. This is all done online.

If the OEM start to limit options, as both Ford and Tesla does, then the online ordering becomes much, much easier. Once cars are presold the dealers, who used to absorb OEM excess inventory, are no longer needed.

What I see happening is that as we convert to BEV, the service department, the cash cow for dealership starts to dry up as BEV will need far less service. As the online model expands which, especially among younger people who are extremely comfortable ordering anything and everything online, traffic into dealerships will dry up. Keep in mind the online model is at a fixed price set by the OEM. The dealer gets a small fee for preparing the car for delivery. There is not enough there for a salesmen commission. At this point I do not see how the dealership survives.

As to a real estate play: My only observation are malls: Many years ago the merger of Sears and Kmart was a real estate play: the stores were not profitable, but the thought was the real estate was: fast forward those properties are being converted to multiple family housing. The land is no longer needed for retail. The land is worth a fraction of what it was worth at the time of the merger.

Just my $.02:

Addendum: Just went back to my original post #1. The questions you raise are answered in the original article. Here is the link to it:

see: https://www.marketwatch.com/story/de...?siteid=yhoof2

 

In Sweden Mercedes has transitioned to fixed pricing, the dealers are independent but Mercedes decides the pricing and what rebates to give for fleet customers. If you ask for quotes from different dealers for a car order the quoted prices will be identical. The dealer are just agents offering test drives, helping you spec cars and putting in the orders. This might be the transitional model everywhere until it goes online.

 

Thanks for telling how it is done in Sweden. Wonder how it done in other countries.

 

In my opinion, the pandemic and chip shortage will lead the US market to fixed pricing and the electric cars' low maintenance will lead car makers to onsite service calls and cooperate owned service centers instead of dealerships.

 

Playing devil's advocate:

While I hope you are correct, there will be howling and the "gnashing of teeth" by the dealership and their lobbyists. They will say that the dealerships provide the best pricing for the consumer because of competitive pricing. Of course all they are doing is defending their huge capital investments. But might there be a problem with the anti trust laws if the OEM set a fixed price?

 

There are many consumer products that has fixed pricing, as long as there are competition from other car makers, there should not be any issues with anti trust laws. When EV's low maintenance takes away the dealer's service center profit, dealerships will start closing due to the lower profit. I am sure some dealers will make ends meet with the fix profit margin on car sales and back end add on from the financial manager but it is hard to make up for 2/3 of profit which the service dept provides.

 

I can’t work up any sympathy for the demise of a system which is based on taking advantage of the unequal positions of the parties. Granted there are dealers who are exceptions to the rule and I wish them well.

 

I guess I’m playing over my pay grade here. I only have a C class. I have no friends who own dealerships. I have no friends who have any of the premium brands of cars. My neighborhood cars are all Chevys Toyota and Honda and me. There is a Volvo. It’s 10 years old. It used to be mine.

I configured my car on MBUSA. Sent screenshots to a salesman through email. Placed the order. Didn’t actually see the salesman until a convertible came in that I could test drive months later. It’s nice to have a central point of contact. I have ordered and bought off the lot. I’m pickier now. Especially since for some reason Bmw and Mercedes rarely have adaptive cruise control, and it’s a must have for me.

 

Neve trust a car salesman or an insurance salesman.