"Just because you're paranoid doesn't mean they aren't out to get you" is more than a classic T-shirt from the '70s. It can also be a useful insight into the thinking of U.S. auto dealers.
Over the past several months, I've heard a lot of dealers share their concerns — some not for attribution — about three serious threats to their business model, which are explored in a series beginning in this week's issue:
1. Electric vehicles are being rushed to market without sufficient consumer demand, foisting new costs onto dealers while presumably reducing service opportunities.
2. Legislators across the country are questioning franchise laws in the spirit of spurring competition, threatening decades of work by the National Automobile Dealers Association and state associations.
3. Smaller and even not-so-small retailers, lacking the scale to develop their own digital platforms, often feel that manufacturer's systems tie their hands on trade-in prices and finance and insurance offerings.
Automakers act gobsmacked by any suggestion that — in their frenzied efforts to compete with Tesla — they might prefer owning and operating their own retail network.
Dealers are valued partners, they all say, and rightfully so.
But many dealers can't help but suspect they are getting slotted into a smaller role, centered on delivery and light service — known as an "agency model." That isn't what automakers say they want to do in the U.S., but it is what they've done elsewhere.
"Look at what is going on — actions, not words — outside the U.S., where there are less stringent laws," said Mark McLarty, who has been a dealer in China, Mexico and Brazil.
Mercedes-Benz and BMW use an agency model in markets such as Australia and South Africa; Volvo and its Polestar affiliate do the same in China and the European Union. Stellantis, looking to reconfigure its retail network in Europe, started by literally canceling all of its franchise agreements there.
McLarty said that, based on what he has seen, automakers "would probably lean more toward involving dealers less, or in a different way," if they had no laws encumbering them. But even if they could, he hopes they wouldn't make such a blunder.
U.S. dealers, he said, are a different kind of retailer, compared with many around the world: "well-capitalized, sophisticated, long-running."
"I'd like to think the [automakers] recognize how much more value the U.S. dealers bring to bear," such as steady reinvestment in talent, customer service, facilities and community relations.
McLarty also pointed out that the retail ecosystem in the U.S. is far more evolved than elsewhere. Useful tools, such as CarOffer for acquiring used inventory, aren't available in other countries. The auction system doesn't work as efficiently elsewhere; titling is less transparent. F&I is still limited in China.