DIRECT SALES & EVS:
MYTHS AND FACTS
Myth #1: State dealer laws are protectionist and limit competition.
State dealer laws protect consumers by governing the way vehicles are sold and serviced. The current franchised new-car dealer model has benefited consumers, manufacturers, and local communities for nearly a century. Because of franchise laws, more than 16,000 local dealerships representing more than 30 brands compete on sales and service, providing consumers with one of the most competitive markets in the economy today. The franchise system is supported by both dealers and existing automakers as the best and most efficient way to buy, sell, finance, and service cars.
Myth #2: Franchise laws reduce choice.
Having multiple retailers of the same brand in the same market creates price competition and superior customer service as these dealers compete for business. More than 16,000 dealerships compete nationwide for sales and service.
Myth #3: There is a price premium to buy a vehicle through a dealership.
Consumers benefit from the franchised dealership business model first and foremost on pricing. When local dealerships of the same brand compete for a customer’s business, prices have the potential to drop—often significantly. University of Auburn economists have measured the impact of dealership price competition and concluded that it lowers the price of new vehicles by about $500.
Myth #4: Getting rid of dealers would save consumers money.
Eliminating local dealerships in favor of factory-owned stores would reduce competition and potentially raise prices. Franchised new-car dealerships have the ability to lower prices through competition and help consumers obtain financing and servicing of their vehicles. Additionally, if factories invested billions of dollars in a retail network, they would expect profits from those investments.
Myth #5: Buying a car straight from an automaker is easier.
Local dealerships provide a convenient and accessible place for consumers to test, purchase and maintain their vehicles. Because dealers carry a variety of new and used cars and trucks, consumers can visit a dealership and leave with a new or used vehicle, complete a trade-in, and finance their purchase on the same day—not the case when purchasing directly from automakers, where the time between ordering a vehicle and receiving it can be upward of three months. Most dealerships now have online sales options, and even online concierge pickup and drop-off options for service and repairs.
Myth #6: Automakers would save money selling vehicles straight to consumers.
With franchised dealerships, automakers gain a free distribution channel for their products. Local dealerships have invested more than $200 billion in land, buildings, and infrastructure to sell and service vehicles. New-vehicle dealerships have transformed over time from corner lots adjacent to service stations into multimillion-dollar facilities with modern amenities, focused on customer satisfaction—all at no cost to automakers.
Myth #7: Allowing automakers to sell their product direct to consumers would have no bearing on the U.S. economy.
Local dealerships are the economic cornerstone of their communities. While other large companies move in and out of communities, dealers remain, offering good-paying jobs with opportunities for advancement.
Dealerships provide a total of more than 1.1 million jobs at their stores, averaging nearly $70,000 in compensation, with opportunities for advancement into management roles even without a four-year college degree. Local dealerships also support an additional 1.18 million jobs in industries that service and do business with auto retailers. These jobs are critical—especially in providing tax revenue—to the bottom line of many local communities. In fact, 15% of all state and local tax revenue comes from dealerships.
Myth #1: Dealers don’t want to sell EVs.
Local dealerships are “all in” when it comes to selling and servicing new electric vehicles. Local dealerships are excited about being a part of that future and know that replacing America’s fleet of 266 million ICE vehicles with EVs could spur an unprecedented sales boom in the auto industry.
For years, franchised dealers have been making commitments and investments to prepare their dealerships as more EVs and EV customers come to the market. Dealerships are investing millions of dollars in charging stations, equipment, tools, and staff training to be able to sell and service EVs.
Myth #2: The reason more consumers don’t have EVs is because of dealers.
Consumers haven’t been buying EVs at a higher rate for a variety of reasons—including additional expense, range concerns, recharging speed, residual value uncertainty, and insufficient recharging infrastructure. And EVs are not for everyone—yet. Dealers are one part of the solution in push EV adoption forward, and, as always, dealers are committed to selling consumers the vehicles that they want and need.
Myth #3: EVs are new technology that requires a whole new sales system.
Dealerships offer a unique value proposition: Dealerships take care of their customers for the entire lifetime of the automobile across the entire automotive ecosystem, not just the point of sale. Dealerships also accept trade-ins, arrange financing, handle registration and titling, sell used vehicles, and service and maintain vehicles.
The best way to sell and service EVs is by utilizing the existing dealership network of more than 16,000 stores and 1.1 million-plus employees. Local dealerships are making capital investments to ensure that their dealerships have the tools and knowledge to sell and service EVs. Further, dealerships are local businesses where customers can go and speak directly with a dealership team member. Conversely, some EV-only manufacturers do not have a robust brick and mortar footprint for consumers to visit in a timely fashion.
Myth #4: Franchised new-car dealers aren’t equipped to sell EVs.
America’s franchised auto dealers have been in business for more than a century and have adapted to changing market conditions and consumer preferences—and will continue to do so. As vehicles have become more and more advanced, dealerships and their staffs have become product experts who understand the technical intricacies of the vehicles they sell and service. Dealerships across America have been investing millions of dollars in charging infrastructure, equipment, tools and staff training to sell and service EVs.
Myth #5: A number of Cadillac dealers sold their franchises so they wouldn’t have to sell EVs.
Last fall, after Cadillac announced plans to abandon internal combustion engines altogether and move entirely to battery electric drivetrains, more than 80% of Cadillac dealers signaled their commitment not just to sell EVs but to sell EVs exclusively, and they backed up that commitment with significant capital investments.
Most of the 20% who opted out were small stores in markets where Cadillac hasn’t performed well, and most of these dealers accepted the buyout because of economic conditions on the ground, not out of concern about the brand’s future product plans. And certainly not because they were anti-electric. For example, one Cadillac dealership in northern Minnesota took the buyout because it sells fewer than 50 new cars per year, and the required $200,000 investment was simply too steep given the small size of its market
Myth #6: Dealers are worried that EVs won’t need as much service.
There is no empirical research or data to substantiate the claim that EVs will require either more or less maintenance. In June 2019, BMW announced it would open two new technician training centers (in Spartanburg, S.C., and Atlanta) to prepare for the acceleration into electrification and develop highly skilled technicians to service electric drivetrains. This hardly suggests that EVs will need zero service.
While EVs won’t require oil changes and don’t have as many moving parts as ICE vehicles, dealerships don’t make money off of oil changes, and engine and transmission repairs are often less than 10% of a service operation’s work. The most-often needed auto repair areas are tires and brakes. EVs will need these services, and auto dealers maintain a local on-demand resource for vehicle maintenance and repair.