For much of the last three years, automakers and dealers have worked together in unprecedented fashion to first survive a pandemic and then discover new ways to thrive in an ever-evolving arrangement that has been lucrative and mutually beneficial.
But old habits in an industry as competitive as this one die especially hard, and it appears that, at least in some quarters, the era of cooperative coexistence is moving into the rearview. Early skirmishes have begun to arise, and if they aren’t dealt with constructively now, they threaten to pave a road right back to the bad old days of constant conflict.
A number of automakers appear to be probing for an escape route from — or at least a viable way around — the franchised dealership business model that has so successfully built this industry in the U.S. for more than a century.
Meanwhile, franchised retailers in a handful of states are persuading friendly legislators to back amendments to franchise laws that will dramatically increase warranty reimbursement rates, shifting tens — and more likely hundreds — of millions of dollars in annual profits to dealers from automakers.
We’ve said this before, but it bears repeating: A change in powertrain engineering and propulsion is not an excuse to abandon the franchise model that has worked for decades.
To be sure, some newer automakers have organized their relatively fledgling businesses around a direct-to-consumer sales model. At first blush, this model would appear to provide shareholders a greater and more speedy return on sales, one in which profits are not shared with a dealer. But the longer their products are in use, the more these inexperienced automakers discover that they need local partners — even rival brands’ franchised dealers — to repair their vehicles and service their customers, lest those customers grow tired of having to tweet to the CEO to get their car fixed.
