Greg Hassler

THE DEALERSHIP MODEL IS BROKEN

At Atlis Motor Vehicles, we believe that dealerships have become a liability to manufacturers, as well as a detriment to consumers. New technologies enable new business models: Electric Vehicles (EVs), the Internet of Things (IoT), autonomous driving, mobile applications and more all interplay for the good of the consumer. These changes will be revolutionary rather than evolutionary, including the way vehicles are bought, sold, and serviced. Atlis is here not just to build a new product, but to build a new experience. As a startup vehicle manufacturer we will be able to leverage new technology to provide customers with better and more consistent service at all stages of vehicle ownership.

Currently most new and used vehicle sales in the United States are transacted at dealerships. This is a central point where a consumer can shop for a vehicle, find financing options, execute a purchase and process all related paperwork. Dealers are supposed to be a knowledgeable source of information, helping to guide your decision into an appropriate vehicle that meets your needs.

Traditional automotive OEMs are entrenched in this 100-year-old business model which is backed by state franchise laws. There are a few advantages to both manufacturers and consumers for having these franchise dealerships, but there are many disadvantages as well. The original purpose of this model was to reduce sales, distribution, and stocking costs for manufacturers, and provide consumer protection where the dealer is the local advocate for the consumer. In some respects the latter is still the case - such as for a warranty issue - but today, consumers often view dealerships as an adversary rather than an advocate. This is especially true in the sales process, where price negotiation is the norm ("one-price" dealers do exist, but they are few and far between), and consumers rarely feel satisfied with the experience, the aggressive sales tactics, and the mountain of unexpected fees.

Dealers also provide widely varying levels of customer service and have inconsistent policies and product knowledge from one to another. This means manufacturers and their products aren't represented consistently across their dealer networks, despite their best efforts of staff training and certifications, showroom requirements, dealer ratings, and more. Ten consumers buying the same vehicle from ten different dealers will each have a unique experience, for better or worse. Manufacturers assign dealers exclusive territories (most often by law), thus eliminating local competition that would otherwise benefit the consumer.

Regarding dealer franchise laws in New Jersey, even the Federal Trade Commission (FTC) commented in 2014: “These laws operate as a special protection for these dealers "a protection that is likely harming both competition and consumers." It later goes on to say "when the government intervenes and outlaws vertical integration, consumers often experience worse service and higher prices" and further "In our view, the well-developed body of research on these issues strongly suggests that government restrictions on distribution are rarely desirable for consumers."

Internet-empowered consumers now have easy access to information, and are much more educated when engaging in a vehicle purchase than they were 50 or 100 years ago. Current studies show that over 85% of consumers research vehicles online before they step foot in a dealership. New generations of consumers are used to modern shopping and purchase models - web-based, app-based, community reviews, instant approval, direct home delivery, and complete transparency at every step throughout the transaction. Dealers struggle to adapt to these new buying habits, requiring multi-hour in-person visits, stacks of paperwork and sitting through sales pitches for numerous add-on products the customer never expressed interest in. Customers are ready for the coming disruption.

New subscription models are being introduced including Atlis' own offering, which we will explore further in an upcoming blog. Risks of dangerous, poisonous, or corrosive fluid spills will become a thing of the past, allowing business opportunities for at-home delivery and at-home maintenance services. Obsolescence will be reduced - planned or otherwise - with vehicles having longer life spans, and upgradable software and hardware.

In this new age, the century-old dealership model has handcuffed manufacturers. State franchise laws that have evolved to protect dealers - and not the consumer or the manufacturer - will prevent existing OEMs from reacclimating to consumer expectations. Up and coming EV manufacturers now have an advantage to be able to explore new business models congruent with consumer desires and expectations, which will create third party opportunities and more local jobs.

By utilizing technologies that are now ubiquitous and familiar to all audiences there is an opportunity to improve the overall customer experience with superior convenience and communication.