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Old 05-15-2019, 10:55 AM
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Why do car manufacturers not sell directly to the public


I dont think they do because i believe that the showrooms for cars in the Uk are private companies that buy cars from the manufacturers and sell it to the public.

Why not cut the middle man out? In this age of internet it should be easy.
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Old 05-15-2019, 11:13 AM
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Because state regulations for the most part make that illegal. This history of those laws goes back quite a long ways, but it boils down to the car dealership lobby being very effective. Some cracks in the laws have appeared, mainly due to Tesla in recent years.
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Old 05-15-2019, 11:15 AM
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Iím pretty sure in most US states in the US, you can only sell cars out of physical dealerships that also service them (particularly warranty work). Since the internet made direct manufacturer-to-consumer sales more possible, more states passed laws to ban them.

Why we have these laws is beyond GQ.
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Old 05-15-2019, 11:16 AM
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1) Same reason you can't order a box of Corn Flakes from Kellogg's. Car makers are interested in making cars. They'd rather sell them in bulk to someone willing to deal with the public just like Kellogg sells in bulk to grocery stores rather than having to deal with the public.

2) Also owning the distribution network could cause anti-trust concerns, like it did when the major motion picture studios also owned theaters.

3) Cars break down. Not nearly as often as they used to, but on the other hand they're getting more and more sophisticated and hard for independent shops to fix.

4) Does the public really want to order a Chevy Tahoe online direct from Chevy without actually seeing it and test driving it? If you don't like it you're in more of a predicament than if you don't like the pair of socks you bought from Amazon.

Last edited by Mdcastle; 05-15-2019 at 11:18 AM.
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Old 05-15-2019, 11:42 AM
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Because state regulations for the most part make that illegal. This history of those laws goes back quite a long ways, but it boils down to the car dealership lobby being very effective. Some cracks in the laws have appeared, mainly due to Tesla in recent years.
That's not the case in all other countries though, and the OP includes a reference to the UK.

A lot of it is just "That's how it's always been done".

A lot is that running a car dealership could add profit for a car company, but it also adds risk and complications, so why go through the trouble of shifting the status quo.

And some of it is that in this age of internet you can actually, if you live in the right country, go to a page like bmw.de, pick all the options you want for your BMW and buy it straight from them.
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Old 05-15-2019, 12:22 PM
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I dont think they do because i believe that the showrooms for cars in the Uk are private companies that buy cars from the manufacturers and sell it to the public.

Why not cut the middle man out? In this age of internet it should be easy.
My knowledge is about the history of U.S. automobile dealers but I might guess that the reasons are similar in the U.K., so I'll tell you what I know.

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Because state regulations for the most part make that illegal. This history of those laws goes back quite a long ways, but it boils down to the car dealership lobby being very effective. Some cracks in the laws have appeared, mainly due to Tesla in recent years.
This is the short answer. These relevant laws are usually referred to as automobile franchise laws.

Automobile franchise laws got their start because, years ago, automakers didn't treat car dealers fairly. Automakers were big enterprises with lots of negotiating power. Car dealers were just small businessmen in their home towns. Automakers would make car dealers sign one-sided contracts in which the car dealers would promise to pay a large franchise fee, set up a shop, advertise, buy a minimum number of cars, prepare the cars for sale ("dealer prep"), buy parts from the automaker, and service the cars they sold, which would include fulfilling the automakers' warranty repairs. In exchange, the car makers promised -- nothing. Literally, nothing. Automakers could revoke the agreement at will. Automakers loved these contracts because they helped raise capital (from franchise fees), they saved more capital because automakers didn't have to set up their own dealerships, and they carried no real obligations.

The car makers might, if they so chose, sell the car dealers some cars. Or they might cancel dealers' contracts if the dealers didn't buy enough cars. Dealers also feared, and this was a big one, that automakers might just set up their own dealerships to compete with independent franchised dealers.

Although dealers were weak compared to automakers but they had at least one advantage over the automakers - there were multiple car dealers in every legislative district in every state in America. And those dealers hobnobbed with and donated to the campaigns of their local politicians. Dealers lobbied for state automobile franchise to protect their right to sell cars. Generally, those laws explicitly prohibited automakers from competing directly with franchised car dealers with one of two types of laws: (1) laws saying automakers couldn't set up competing dealerships or, (2) laws saying that car makers couldn't sell cars directly to consumers at all (even if there were no competing dealers). Tesla discovered these latter laws when they went to set up their own direct-to-consumer sales model. Dealers in other states that had type (1) laws (like Missouri) amended them to type (2) laws when Tesla began operations.

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Originally Posted by TheMightyAtlas View Post
Iím pretty sure in most US states in the US, you can only sell cars out of physical dealerships that also service them (particularly warranty work). Since the internet made direct manufacturer-to-consumer sales more possible, more states passed laws to ban them.
The laws preceded the internet by decades but the advent of the internet (and particularly, Tesla) has caused many states to amend their franchise laws.

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1) Same reason you can't order a box of Corn Flakes from Kellogg's. Car makers are interested in making cars. They'd rather sell them in bulk to someone willing to deal with the public just like Kellogg sells in bulk to grocery stores rather than having to deal with the public.
This is wrong. Tesla, for one, wants to sell individual cars directly to consumers but they are prohibited from doing so in many states by law. Other automakers who might like to adopt a direct-to-consumer sales model can't do so because of the same laws.

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2) Also owning the distribution network could cause anti-trust concerns, like it did when the major motion picture studios also owned theaters.
Maybe, but this wasn't the real motivation for the laws.

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Originally Posted by Mdcastle View Post
3) Cars break down. Not nearly as often as they used to, but on the other hand they're getting more and more sophisticated and hard for independent shops to fix.
There is no reasons that independent shops couldn't fix cars if they were given the same access to tools and training that new car dealers receive. This is a new car dealer rationalization for their continued existence.

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4) Does the public really want to order a Chevy Tahoe online direct from Chevy without actually seeing it and test driving it? If you don't like it you're in more of a predicament than if you don't like the pair of socks you bought from Amazon.
This is the least GQ answer possible. Let the public decide.
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Old 05-15-2019, 12:42 PM
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My knowledge is about the history of U.S. automobile dealers but I might guess that the reasons are similar in the U.K., so I'll tell you what I know.
Direct sale from car manufacturers were an unusual option until recently in many countries that have no such laws. Tesla's trouble getting permission to open their own stores in the US was, as far as I can tell, rather unique, but other countries still generally have car dealers that are not manufacturer owned.
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Old 05-15-2019, 12:48 PM
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Let the public decide.
Actually what the public would like to do is test drive competing models:
First show me the Tahoe, then the Ford Expedition and last I would like to see a Toyota Sequoia.

They would like to do this in one place, rather than drive all over town. It's not possible now for new cars.
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Old 05-15-2019, 01:27 PM
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Originally Posted by naita View Post
Direct sale from car manufacturers were an unusual option until recently in many countries that have no such laws. Tesla's trouble getting permission to open their own stores in the US was, as far as I can tell, rather unique, but other countries still generally have car dealers that are not manufacturer owned.
Fair enough, but as I noted, even before franchise laws, "Automakers loved these [dealership franchise] contracts because they helped raise capital (from franchise fees), they saved more capital because automakers didn't have to set up their own dealerships, and they carried no real obligations." I suspect this is roughly the state of the law in countries without dealer franchise laws.

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Actually what the public would like to do is test drive competing models:
First show me the Tahoe, then the Ford Expedition and last I would like to see a Toyota Sequoia.

They would like to do this in one place, rather than drive all over town. It's not possible now for new cars.
I'm not sure what you're arguing here. New car dealers often sell multiple brands from one lot, so it's possible to drive competing models at the same dealership. Some combinations seem to be rare (e.g., Ford/Chevy dealers) but others are surprisingly common (Ford/Toyota dealers). Dealers also often set up stores adjacent to competing dealerships so you can walk between them if you are so inclined. It's not that hard to test drive multiple competing models on the same day without driving too far. On the other hand, if automakers sold all their cars from factory dealerships, the Chevy dealer would not sell the Expedition or Sequioa, so I don't think eliminating independent dealers would further your goal. Furthermore, some customers don't care about test driving their cars.
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Old 05-15-2019, 01:36 PM
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1) Same reason you can't order a box of Corn Flakes from Kellogg's. Car makers are interested in making cars. They'd rather sell them in bulk to someone willing to deal with the public just like Kellogg sells in bulk to grocery stores rather than having to deal with the public.
One of the winning strategies for Steve Jobs was to have their own Apple stores thereby cutting off the markup done by retailers.

Car manufacturers love to sell directly to customers. At least Tesla does here in Texas and the dealership lobbyists wanted to stop that by introducing a bill, which Tesla owners and Tesla fought back and were victorious.

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2) Also owning the distribution network could cause anti-trust concerns, like it did when the major motion picture studios also owned theaters.
Tesla does it. Apple does it - some apple products are about the same price as a car. Samsung does it with phones, appliances, computers etc etc. The anti-trust concerns are overblown by dealers to keep their money.


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3) Cars break down. Not nearly as often as they used to, but on the other hand they're getting more and more sophisticated and hard for independent shops to fix.
Yeah so ? Tesla has their repair shop. Apple does too. You can go to a third party too. In fact cell phone repair is a booming business all around town.

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4) Does the public really want to order a Chevy Tahoe online direct from Chevy without actually seeing it and test driving it? If you don't like it you're in more of a predicament than if you don't like the pair of socks you bought from Amazon.
Tesla has a showroom where you can go and test drive their cars. Same thing can be done with Chevy Tahoe too. I am not seeing the big deal here.
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Old 05-15-2019, 04:47 PM
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Once upon a time you could actually order a car directly and go to Detroit to pick it up. "Destination charges" varied from dealer to dealer, mostly depending on distance from the factory. Eventually the automakers got tired of it and set a single destination charge for all dealers everywhere. I think federal law requires automakers list the charge separately so it can't be part of the price negotiations.

As for why auto manufacturers don't change, and why states resist changing their laws, remember, auto dealers have a LOT of clout with their manufacturers, and they also generate a lot of spending in their areas (and make campaign contributions to their local legislators.)

Re: Tesla, they had an opportunity to build an entirely new business model from the ground up. You could also buy a brand-new Avanti straight from the manufacturer. In fact, I think that was the only way you could buy an Avanti
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Old 05-15-2019, 05:59 PM
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I was hoping to find the answer for the UK and Europe here. AFAIK there are no laws preventing Ford or anyone else from selling cars direct to the public, but it seems that they all prefer to keep the buyers at arm's length. I used to work for a large UK company that purchased many hundreds of Fords every year. All these sales were routed through a dealer, although we did get a huge discount. I was told that the really big buyers like Hertz, dealt direct with the factory, but I don't know that for a fact.

I believe that Mercedes used to allow a buyer to collect their new car from the factory. Apparently, you would wait in a reception area with coffee and biscuits and your car would be driven out onto a red carpet and ceremoniously handed over. In spite of this, the purchase was through a dealer and not direct. They discontinued the scheme in 2013 I believe.
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Old 05-15-2019, 07:18 PM
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4) Does the public really want to order a Chevy Tahoe online direct from Chevy without actually seeing it and test driving it? If you don't like it you're in more of a predicament than if you don't like the pair of socks you bought from Amazon.
The most "futuristic" way of buying a Tesla today consists of:
- Don't bother going to a showroom.
- Pick out the options and order the car from Tesla's website.
- Fill out the financial/insurance/etc. information online.
- Schedule a delivery date.
- Someone shows up at your home or workplace with your new car. If you have a trade-in, he drives that off. If not, he takes an Uber back to work. I'd say he hands you the keys, but there are no keys. You've already set up your phone to act as the key.
- If the car sucks, you have a 7 day no-questions return policy.

Of course, you can schedule a test drive as well, but most Tesla owners like their cars. And if they don't, they're more likely to find out in the 7 day trial period than they are in a 10 minute test drive (especially since it's their very car that they're driving, instead of just a similar model).
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Old 05-15-2019, 07:26 PM
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The most "futuristic" way of buying a Tesla today consists of:
- Don't bother going to a showroom.
- Pick out the options and order the car from Tesla's website.
- Fill out the financial/insurance/etc. information online.
- Schedule a delivery date.
- Someone shows up at your home or workplace with your new car. If you have a trade-in, he drives that off. If not, he takes an Uber back to work.
Some people get the car delivered by Tesla electric semi-truck.
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Old 05-15-2019, 08:35 PM
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The most "futuristic" way of buying a Tesla today consists of:

...Someone shows up at your home or workplace with your new car.
What, the Tesla doesn't drive itself to your house? Get cracking, Elon!
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Old 05-15-2019, 08:58 PM
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What, the Tesla doesn't drive itself to your house? Get cracking, Elon!
I'm sure they're working on it!

This might well be one of the first real applications of no-human self-driving. There are only a handful of origin points, and they can limit the destinations to just a few big places at first (a dozen Bay Area businesses would be a significant start, given how common Teslas are here). And they can limit it to daytime only, no rain, etc. It might not be long at all before we see this happen.
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Old 05-15-2019, 09:09 PM
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Actually what the public would like to do is test drive competing models:
First show me the Tahoe, then the Ford Expedition and last I would like to see a Toyota Sequoia.

They would like to do this in one place, rather than drive all over town. It's not possible now for new cars.
How would it be possible if you bought direct? Here, as in most cities, there is a auto-dealers row, with a good number of dealerships. You can easily walk from one to another.
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Old 05-16-2019, 03:45 AM
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I believe that Mercedes used to allow a buyer to collect their new car from the factory. Apparently, you would wait in a reception area with coffee and biscuits and your car would be driven out onto a red carpet and ceremoniously handed over. In spite of this, the purchase was through a dealer and not direct. They discontinued the scheme in 2013 I believe.
BMW and Volvo both offer factory delivery. From Canada it includes 2 tickets to Europe and 15-30 days of insurance. You drive around and then drop off the car for shipment and pick it up from the dealer you bought it through.
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Old 05-16-2019, 04:36 AM
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Actually what the public would like to do is test drive competing models:
First show me the Tahoe, then the Ford Expedition and last I would like to see a Toyota Sequoia.

They would like to do this in one place, rather than drive all over town. It's not possible now for new cars.
I don't need to go to a car store for that; one nice thing about renting cars often (due to traveling often for work, as I do) is that you get to test-drive a lot of different ones, without a salesman trying to bore a hole through your eardrums while you're trying to listen to the sounds of the motor.

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I was told that the really big buyers like Hertz, dealt direct with the factory, but I don't know that for a fact.
Car-rental companies generally don't buy, they lease. Eventually those cars are put up for sale as second-hand, which sounds better than "it's been driven by a bunch of different people who didn't care about it".
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Old 05-16-2019, 05:00 AM
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Car-rental companies generally don't buy, they lease. Eventually those cars are put up for sale as second-hand, which sounds better than "it's been driven by a bunch of different people who didn't care about it".
Leasing is just a way of financing a purchase and gives someone else a chunk of the profits. According to this site "As a general rule, rental car companies buy a large portion of their vehicles subject to repurchase or depreciation programs with the vehicle manufacturers. Under these programs, manufacturers agree to repurchase the vehicles at a specific time and/or price in the future, subject to certain conditions, or to guarantee the depreciation rate on the cars throughout the holding period."

The implication is that manufacturers and car rental companies (their biggest customers by far) have a fairly cosy relationship. Rentals are frequently sold (or returned) at six months old and with low mileage. These cars are often very good buys (especially in the UK where VAT is 20% of the price of a new car) and the buyer will probably not be aware that the car is ex-rental.
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Old 05-16-2019, 06:44 AM
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I was hoping to find the answer for the UK and Europe here. AFAIK there are no laws preventing Ford or anyone else from selling cars direct to the public, but it seems that they all prefer to keep the buyers at arm's length. I used to work for a large UK company that purchased many hundreds of Fords every year. All these sales were routed through a dealer, although we did get a huge discount. I was told that the really big buyers like Hertz, dealt direct with the factory, but I don't know that for a fact.

I believe that Mercedes used to allow a buyer to collect their new car from the factory. Apparently, you would wait in a reception area with coffee and biscuits and your car would be driven out onto a red carpet and ceremoniously handed over. In spite of this, the purchase was through a dealer and not direct. They discontinued the scheme in 2013 I believe.
I also heard that with premium Mercedes via the dealer the buyer (via the dealership) would be flown to the factory in Germany when his cars engine block was being forged. Not sure if this isjust an urban myth.

Last edited by Nansbread1; 05-16-2019 at 06:44 AM.
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Old 05-16-2019, 07:45 AM
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I don't need to go to a car store for that; one nice thing about renting cars often (due to traveling often for work, as I do) is that you get to test-drive a lot of different ones, without a salesman trying to bore a hole through your eardrums while you're trying to listen to the sounds of the motor.
The problem with this is that the company tends to only pay for a certain class of rental cars, which are unlikely to be the class of car that I would ever consider purchasing. In the USA, at least, we have this ridiculous rental car trends where shitty econoboxes are considered ďmidsize,Ē and consequently itís common to end up in something like a Toyota Corolla.
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Old 05-16-2019, 07:54 AM
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The company is me except when my client insists in paying for it directly, so I'm golden Plus, a Corolla is already about two car sizes bigger than what I'm interested in when I travel by myself.


Usually For some reason every time it's the client who pays they insist on Hertz and Hertz insists in giving me an upgrade. Call me weird but if I ask for something "Yaris hutchback or similar" I don't really want a Qashqai. Last time I was in the US I got an upgrade that was pretty cool due to my initial sedan having a booboo: I got some sort of Caddy. But that landbarge can't even be purchased in Spain unless you import it individually, and anyway it wouldn't fit into my street.
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Old 05-16-2019, 08:50 AM
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The laws preceded the internet by decades but the advent of the internet (and particularly, Tesla) has caused many states to amend their franchise laws.



This is wrong. Tesla, for one, wants to sell individual cars directly to consumers but they are prohibited from doing so in many states by law. Other automakers who might like to adopt a direct-to-consumer sales model can't do so because of the same laws.
Why wouldn't the Fed law be supreme as it falls under the ICC?
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Old 05-16-2019, 10:48 AM
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Why wouldn't the Fed law be supreme as it falls under the ICC?
Which federal law? One might be passed someday but I don't think anything exists now to address this.
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Old 05-16-2019, 11:37 AM
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Which federal law? One might be passed someday but I don't think anything exists now to address this.
Then it would fall under the same paradigm as railroad rules*. If it is under Federal jurisdiction and they choose not to make up laws for a certain situation the States cannot make laws regulating the activity.



Reference to a previous thread about trains blocking traffic.
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Old 05-16-2019, 11:41 AM
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The company is me except when my client insists in paying for it directly, so I'm golden Plus, a Corolla is already about two car sizes bigger than what I'm interested in when I travel by myself.
I guess I didn't mean the size of the car per se, because there are definite cultural differences. When you get a subcompact (labelled midsize) in the USA, its chief attribute is that itís cheap. In this market, people who buy Corollas, for example, buy them because theyíre cheap, and donít spruce them up with optional features that inflate the price, if theyíre even available. Iíd wanted a Fiesta several years back, when it finally arrived in our market. However, aside from power windows, it was very downmarket, without any of the features one could get in, say, a Fusion/Modeo. Certainly, there are austere versions of the Fusion available, but their take rate was about 5% (mostly fleets). (These days, lowest-end vehicles made by my company arenít even available to the general public, and must be ordered from fleet sales.)
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Old 05-16-2019, 11:52 AM
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Originally Posted by bob++ View Post
I believe that Mercedes used to allow a buyer to collect their new car from the factory. Apparently, you would wait in a reception area with coffee and biscuits and your car would be driven out onto a red carpet and ceremoniously handed over. In spite of this, the purchase was through a dealer and not direct. They discontinued the scheme in 2013 I believe.
You can do this with a Chevrolet Corvette; my father-in-law picked his up from the factory in Bowling Green, Kentucky a few years ago. The package also can include a factory tour, but, as with the Mercedes example, you still have to make the purchase through a dealer.

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Old 05-16-2019, 12:13 PM
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I was hoping to find the answer for the UK and Europe here. AFAIK there are no laws preventing Ford or anyone else from selling cars direct to the public, but it seems that they all prefer to keep the buyers at arm's length. I used to work for a large UK company that purchased many hundreds of Fords every year. All these sales were routed through a dealer, although we did get a huge discount. I was told that the really big buyers like Hertz, dealt direct with the factory, but I don't know that for a fact.
I don't know about mainland Europe, but in the UK a large number of dealers are manufacturer-owned. For example, the Rootes Group was a dealership chain before it bought up Hillman, Humber and other manufacturers and started building its own cars. The Rootes dealership network lives on as Robin & Day which is wholly owned by PSA (Peugeot/Citroen). Ford of Europe also owns a number of UK Ford dealerships, primarily in the south.

As far as I can tell, the prevalence of private dealerships in the UK has something to do with English and Welsh usury or finance laws; it seems as though manufacturers were prohibited from offering financing direct to the public, so it was more profitable to sell to third parties who could. I can't find a direct citation for that though.

It probably also has something to do with coachbuilding; until the 1930s, even low-end vehicles were often built as rolling chassis, and coachbuilders (who also functioned as dealers) would attach bodies and interiors to customers' tastes.
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Old 05-16-2019, 12:58 PM
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Then it would fall under the same paradigm as railroad rules*. If it is under Federal jurisdiction and they choose not to make up laws for a certain situation the States cannot make laws regulating the activity.
Why would the federal government care about car sales directly to consumers? With trains I can see the interstate commerce and general infrastructure interest, but there would need to be a reason for the federal government to assert control over car sales.
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Old 05-16-2019, 02:46 PM
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Why would the federal government care about car sales directly to consumers? With trains I can see the interstate commerce and general infrastructure interest, but there would need to be a reason for the federal government to assert control over car sales.
Because a car sale that crosses state line falls under ICC where the Feds reign supreme.
  #32  
Old 05-16-2019, 02:48 PM
russian heel is offline
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The US is such a large country that the logistics of selling and delivering a car to many markets would seem complex to me.

Tesla only has showrooms in select well to do markets. If you like in Podunk, Kentucky and really want one you’ll have to drive several hundred miles to test drive it.


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  #33  
Old 05-16-2019, 03:31 PM
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Quote:
Originally Posted by Saint Cad View Post
Because a car sale that crosses state line falls under ICC where the Feds reign supreme.
Pretty much the sale of everything in the US can cross state lines.

But again, why does the federal government care about direct car sales to consumers? Why would they take a stance either way? And what makes you think they would come down any differently than the 50 state legislatures already have?
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