Why do car dealerships still exists?
In the world of online shopping, the antiquated car dealerships will not budge. And we all have ensured that they don’t go away for sometime longer.
Image source: carvana.com
In a day and age almost everything and some more can be bought online, except for most the new cars. A recent survey suggest a staggering 80% of new car buyers would like to avoid dealing with the dealerships. Further 20% prefer to buy a tesla or any other similar product offering which can be ordered online. The consumer base is there. Also people buy far more expensive and weird items off the internet. The finance is available to support online purchase of new vehicles the same as in the store. So why have the car manufacturers not pushed for direct sales. And there two very good reasons for it.
The well informed car enthusiast is probably aware of the car dealer lobby making it hard for car manufacturers to sell cars directly to the end consumer. The same lobby also continues to push against any measures by the FTC to introduce more transparent car buying procedures. Car dealerships have long squeezed the loosely defined MSRPs. In addition many add fake transaction fees in there for a good measure. Car dealers are definitely laughing their way to the bank. If only and surely car manufacturers are paying close attention to social media and reviews, they will have seen a considerable amount of revenue lost just by having to sell their cars through a dealership. Also is the car dealership lobby stronger than the billion dollar car giants? But so far we haven’t seen a single car company choose to break away from this mode.
Part of the reason is car manufacturers would have to invest significant amount of resources if they were to replace car dealerships. Since companies like Teslas and other electric car companies were startups, they could risk going the route to sell directly to users. Even they have to have physical presence in every state. Service centers are a big challenge for car companies. It is easier to let a third party deal with them than having to setup a service infrastructure in addition to a manufacturing one. For this reason alone, car companies will let car dealerships stick around.
So until most of us choose to buy an electric car online or sign of the subscription services, expect the car dealership to go nowhere.