Considering the top EV manufacturers like Lucid, Rivian, Tesla, and Polestar are involved with the direct sales of their vehicles to the consumers, it is a bit of astonishment that Sony Honda Mobility plans that follow this suit. The latest venture between Japanese corporate giants plans on selling their upcoming Afeela 1 electric vehicle right to the consumers instead of using any conventional dealer network.
Acura and Honda dealers are far from getting thrillers, mainly because Afeela 1 was built at the Honda factory in Ohio. Adding insult to injury, vehicle service is handled by Crash Champions collision repair centers nationwide, which inspect Acura or Honda dealers. The reaction of the National Automobile Dealers Association (NADA) was predictable.
The President and CEO of NADA stated that Honda should know that any misguided attempts to bypass or undercut US dealers are often challenged in statehouses and courthouses throughout the nation, with the full support of NADA.
The Importance of Trust in a Car Dealer
Car dealer relationship is more than just making simple purchases as it involves a lot of trust. Whenever you are steering through the dealership, you are relying on them to offer clear deals, fair prices, and top-notch services. If you are dealing with a dealer who is complex or dishonest, then the urge to make a shift might appear like a breath of fresh air. But switching out the dealers instead of appropriate research would take you to the same situation with someone who is not very reliable or even inclined towards deceptive techniques.
Not every car dealership functions in the same way. A few of them are extremely prominent in terms of offering clear pricing and customer-friendly services, although others may engage in aggressive sales tactics, leaving you irritated. Trusting is essential while dealing with essential purchases. Switching to the dealership instead of knowing about the practices would include encountering the dealer who would take the perk of your lack of any experience in handling them.
VW Will Likely Join Honda and Sony in Those Lawsuits
Volkswagen Group is even planning to sell its latest Scout electric SUV directly to consumers. American VW dealers are often upset, as the new Scouts are the kind of vehicle that has been projecting its request for building headquarters for decades.
The decision often led to the California New Car Dealers Association or CNCDA sending the cease-and-desist letter the past year to Scout Motors and VW stating that since Scout is an affiliate of VW, the German automaker did not compete against their franchises right under the nose of California law. It had been just opening the salvo.
The dealers often fight the automaker on a state-wise basis with the dealer franchise laws, which are often state-regulated. The existing automakers are often needed by the laws to sell their new vehicles with the help of their existing franchisee dealers with the automakers who do not own one. However, the already established sales models appear highly archaic with the consumers who get accustomed to the direct-to-consumer sales models like the Tesla, Rivian, or Lucid involved with the direct sales of the vehicles to the consumers who lack the current sales network.
The Online Onslaught Began Decades Ago
If any firms initiated their online automotive retailing, Dealer.com was founded in 1998 to aid auto dealers in managing and selling their inventory. The platform expanded to include software for CRM and F&I, offering support and software for consumer-focused websites. At the onset of the pandemic, the company held almost 60% of the market share among the latest car dealer websites, with more than 30 OEM-branded sites.
The software enables customers to handle just about every step of purchasing a car online without having to set foot in the showroom. When the retailers shut down in 2020 due to the pandemic’s onslaught, consumers became more comfortable with handling the extreme car-purchasing experience right out of the showroom.
Existing dealers are often increasingly comfortable adopting this sales model, as they are getting a cut of the action.
FordDirect is one of the ideal companies forming a joint venture between Lincoln or Ford dealerships and Ford Motor Company, helping customers buy vehicles online with their choice of local dealers. The other one is Hyundai, which sells its vehicles with the help of Amazon Autos. Customers often shop for finance while choosing their new rides online and choosing their local dealer.
Direct Sales Aren’t Always the Answer
Direct sales aren’t always a panacea. Consider Tesla, where getting your car serviced can take weeks, according to online reports. Then there’s EV startup Fisker, which filed for bankruptcy protection in June 2024. Like other EV startups, it used a direct sales model, but as sales foundered in January 2024, it turned to a traditional dealership model. It was too little, too late.
VinFast Auto, a Neophyte Vietnamese EV automaker, sells cars directly to consumers with the help of dealerships. Currently, VinFast includes 18 dealers across Florida, California, Connecticut, North Carolina, Kentucky, New York, and Texas, with more to get included in the list.
But the bigger and more renowned automakers have tried their hands at direct sales, mainly through the Ford Retail Network. It has invested in the Ford dealerships across Tulsa, Oklahoma City, San Diego, Salt Lake City, and Rochester, NY, created in 1998 by the Ford Motor Company. The stores were created with huge inventories, no overpricing, and the non-commissioned sales staff.
As you would expect, it enraged the nearby dealers, who often feared the factory-owned stores getting preferential treatment. In the end, the efforts of Ford failed while reinforcing the key car dealer argument with the automakers who are often regarded as the good manufacturers as they are not good service providers or even the retailers.
Final thoughts
However, the transitioning nature of the automotive service and retailing has unintended outcomes; with the requirement for expensive technology investments, EVs are becoming mainstream, with the smaller dealers growingly selling out to the bigger ones. As noted by Kerrigan Advisors, the dealership selling consultancy with over 544 franchises was sold during the initial three quarters of 2024 with a time record as high.
The consolidation among the bigger dealers is often projected to aid them in offering the services and sales that the ORM always looked out for. It allows both the dealers and the automakers to maintain their leaner inventory levels, driving up costs for the dealers, who encounter fewer carrying costs. This situation reduces the requirement for any discounted vehicles with the cleared inventories for the automakers.
Consumers are becoming more comfortable with the new car orders at the full list prices with the unintended results that are clear with the prices are projected to increase at newfolds.
