Direct-to-consumer car sales face tough lobbying pressure from dealers
Volkswagen's Scout brand hasn't even launchedand already it's in trouble. VW has said it wants to sellits new line of pickup trucks and SUVs directly to consumers -- you know, the way Tesla does.
This is not going over well with its dealer network, which sells VWs and Audis to consumers.
"VW AGs decision to attempt to sell Scout vehicles direct to consumers and compete with its U.S. dealer partners is disappointing and misguided, and it will be challenged," said Mike Stanton, CEO of the National Automobile Dealers Association (NADA).
"Unfortunately, its also not terribly surprising, as VW AG CEO Oliver Blume and Scout CEO Scott Keogh have avoided engaging with or even responding to NADA for months," Stanton said.
Volkswagen is hoping that Scout will help it grab a bigger slice of the American market, where pickups and SUVs are the choice of most consumers these days. The company certainly needs a boost. Reports say it plans to shut down at least three factories in Germany, downsize its remaining plants and lay off tens of thousands of workers.
VW fortunes have plunged recently, thanks in part to its ill-fated rush to go all-electric in the wake of the Dieselgate scandal that tarnished its reputation. Consumers haven't flocked to electric cars as fast as VW had expected and it is left with factories producing cars it can't sell.
The head of VW's works council -- the equivalent of an American union -- said the company wants to cut wages 10% and institute a wage freeze in addition to the plant closings and layoffs. Such drastic actions are rare in German industries.
Dealers are unsympathetic
But back in the USA, dealers are unsympathetic.
"Since VW AG signaled the reemergence of the Scout brand in the U.S., NADA has communicated very clearly on numerous occasions to their leadership that the franchise system is the best and most-efficient way to deliver the customer experience that todays marketplace demands," the NADA's Stanton said.
"NADA and state dealer associations fully stand behind VW and Audi dealers that are being left behind by this decision, and are prepared and will challenge this and all attempts to sell direct in courthouses and statehouses across the country," he added.
Why not sell direct?
While it might seem more straightforward for car manufacturers to sell directly to consumers, there are a few key reasons why they can't in the US:
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State Franchise Laws: Most states have laws that specifically prohibit or heavily restrict direct-to-consumer car sales. These laws were put in place to protect independent dealerships from being crushed by the manufacturers' larger resources.
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Dealership Lobbying Power: Auto dealerships have strong lobbying groups, like NADA, that have successfully fought to maintain these laws. They argue that dealerships provide valuable services like local jobs, consumer advocacy, and convenient service centers.
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Existing Infrastructure: Car manufacturers have invested heavily in their existing dealership networks. Switching to a direct-sales model would require significant restructuring and potentially disrupt relationships with their franchisees.
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Consumer Protection: Some argue that dealerships offer a layer of consumer protection, acting as a buffer between the manufacturer and the buyer. They can help with issues like warranty claims, recalls, and trade-ins.
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Price Competition: Dealerships compete with each other on price, which can theoretically benefit consumers. However, the lack of direct sales can also limit price transparency and negotiation power.
However, the landscape is slowly changing:
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Tesla's Direct Sales Model: Tesla has successfully challenged these laws in some states, selling cars directly to consumers through its own stores and online. Other EV makers have followed suit.
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Evolving Consumer Preferences: Many consumers prefer the convenience and transparency of online shopping, putting pressure on the traditional dealership model.
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Rise of Electric Vehicles: The rise of EVs, often sold by newer companies without established dealership networks, is further pushing the boundaries of the traditional system.
Ultimately, the future of car sales in the US is likely to involve a mix of direct-to-consumer and dealership models. Consumer demand and evolving technology will play a significant role in shaping this landscape. Whether VW can hold out long enough for that to happen is anybody's guess.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-10-28 19:50:05
