By on November 23, 2020

Unless you happen to be the primary stakeholder in Amazon, 2020 probably hasn’t’ been the kind of year you’re likely to miss. However, there is no shortage of lobbyist groups and trade organizations willing to praise it as a triumphant time for modernity. This includes the National Automobile Dealers Association (NADA) Chairman Rhett Ricart, who believes digitizing the industry is the best pathway forward. While he hasn’t forgotten that pandemic-related lockdowns closed showrooms and factories, resulting in extremely lean inventories and weak sales, he claims it has accelerated everyone’s willingness to utilize online sales formats.

But there’s little reason to assume such a move would be better for dealerships from our vantage point. Haggle-free, direct pricing and ordering over the internet removes a lot of what the showroom does. This new model runs the risk of obliterating smaller storefronts and relegating the rest into glorified service centers doubling as a delivery hub.

Having been inside them ourselves, we don’t have an abundance of love for automotive dealerships. They’re just businesses aggressively trying to turn a profit and are frequently (and sadly) under-informed on the vehicles on the lot. That said, manufacturers often bully them into making changes for the privilege of selling those products. Right now, OEMs are warning them that they had better be prepared to accommodate electric vehicles people still aren’t buying in large quantities (Tesla excluded) and digital sales.

Speaking with Automotive News this week, NADA’s Ricart explained the situation — citing a July survey that claimed 82 percent said the digital process introduced during COVID lockdowns would not be leaving once restrictions lifted. He said that at-home test drives, in addition to pickup and delivery services, would remain the norm.

From AN:

Ricart cautioned, however, that some automakers were “showing signs of regression to old, bad behaviors” that could curtail the progress dealers have made. As the digital retailing experience evolves, automakers will need to rethink their “mausoleum mandates,” he said, referring to the “costly and ever-changing” image programs that define how dealer facilities should look.

“The biggest obstacles to success in 2021 aren’t corruption, obstruction and destruction,” he said. “The biggest obstacle is regression.”

While it sounds a lot like Ricart (who owns a sizable auto group in Ohio, himself) is telling dealers to toe the line with the long-term desires of manufacturers and government, he claims it’s actually consumers spurring the trend.

“Customers are telling us how they want to buy cars. All you’ve got to do is listen. If we just do what they ask, it makes it so much easier. That will be the challenge next year,” he told the outlet. “Manufacturers think they’re going to tell customers what to do. They think they’re going to present a product and tell customers how they’re going to buy it, then they’re going to go ahead and they’re going to tell dealers how to take care of customers. Don’t do that.”

“The biggest challenge for us is a regression. We’ve got such a great thing going right now, a great thing going for customers. Just don’t regress. We know the formula, and it’s right in front of us. Let’s just keep using it.”

This, Ricart claimed, would be the best way to contend with changing customer trends and the likelihood of prolonged government restrictions (even after there’s a COVID-19 vaccine, apparently). But cautioned that states probably couldn’t go too wild on lockdowns, as it would eventually start eating into their tax revenues.

Frankly, the interview didn’t make it sound like he was terribly interested in supporting dealerships — especially those hoping to retain traditional models of doing business. However, he did state that OEMs were demanding too much from showrooms, adding that this would become increasingly unimportant as more customers did their dealings over the internet.

“The manufacturers have a franchise, and they have the right to say, ‘Hey, do you want to sell my vehicle? This is what you need to do to have it, OK?’ They have that right,” Ricart said. “It’s their product. But what’s happened is that they’re always historically slow to react to things, and they’ve got to understand that this COVID has put this digital world on hyperspeed. And they’re just kind of saying, ‘Well, we’re going to look and see because we still like our big showroom on the freeway that everybody can see.'”

“We’re telling them people don’t care how big your showroom is, and how big your showroom is is not a reflection on the quality of your car. It’s not a reflection on the quality of the dealer. It’s not a reflection on anything other than a big showroom. Customers are going to be more price-conscious because we’re going to be more transparent. Dealers have to be able to right-size their business model to be able to meet what our customers are asking for. That’s all. That’s all we’re asking manufacturers.”

Right-sizing dealerships may be necessary if North America fails to see an economic rebound next year. But that will mean shrinking storefronts in many instances — presumably resulting in fewer jobs. We also have a hard time accepting that it’s the dealerships that are steadfast in embracing these new digital trends. Practically every automaker in the world has been toying with the idea of vehicle subscriptions and moving toward new sales models where they’re less dependent upon brick-and-mortar stores. It certainly seems like OEMs are the ones spearheading the digital initiative NADA is supporting. Then again, maybe Ricart knows something we don’t.

[Image: LM Photos/Shutterstock]

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20 Comments on “NADA Chairman Doesn’t Seem to Like Traditional Auto Dealers Much...”


  • avatar
    SCE to AUX

    “This new model runs the risk of obliterating smaller storefronts and relegating the rest into glorified service centers doubling as a delivery hub”

    Yep, bring it.

    This guy should hire a team of bodyguards – no joke. I agree with him, but it’s a very unpopular message in the deeply entrenched dealer culture.

    No-haggle pricing is the future – If you don’t like the price, just look for a different brand or a different dealer. Dealers who try to gouge will find themselves with no customers. And given the ability to ship a new car to your doorstep, geography won’t allow dealers to gouge customers who are far from a competing dealer.

    • 0 avatar
      Steve Biro

      +1. I’m already seeing a couple of dealer TV ads in the Philly market saying, essentially “Geography doesn’t matter. If you’re seeing this mesage, we’re already your dealer. You just don’t know it yet.”

      Bring it on, I say. I’m all for no-haggle pricing. But the advertised price has to be realistic – not the inflated numbers we’re seeing now that assume haggling or rebates.

      The only thing I’m not getting on board with is a vehicle subscription. EVs? Maybe eventually. But not as soon as the manufacturers want. Not even close.

      • 0 avatar
        SCE to AUX

        Subscriptions will have their place, but the costs will be prohibitive for most consumers. Methinks subscriptions will essentially be priced slightly below car rentals – OK for a few days or months, but crazy for years on end.

        But I guess if you want to taste-test a lot of cars, or impress your friends at a post-Covid gathering, a subscription could make sense. Not sure that a vehicle being electric would have much to do with it, but that is where leases thrive, especially for non-Tesla EVs.

        • 0 avatar
          Matt Posky

          I’m inclined to agree with the subscription model being priced like extended rentals but heaps of manufacturers are talking about transitioning to a society where people no longer own automobiles. I don’t know if this is virtue signaling on behalf of the World Economic Forum’s “Great Reset” nonsense or simply something OEMs think might somehow become profitable but it’s weird how popular it has gotten among industry leadership. Frankly, it seems untenable but there’s been a lot of chatter about it since roughly 2018.

          • 0 avatar
            DC Bruce

            Don’t leases look a lot like subscriptions? You pay a monthly payment for X months and then you turn in the car. Probably you have to spend your own money for routine maintenance, but repair costs are covered by the B2B warranty.
            I think all of this stuff is viable so long as money is cheap. But, when money becomes expensive, I think this will collapse except perhaps as a way for “luxury” manufacturers to discount without appearing to do so through subsidized leasing.

    • 0 avatar
      bullnuke

      Rhett Ricart owns a very large automotive sales group in Columbus, Ohio, (Ford, Genesis, Hyundai, Kia, Mitsubishi, Mazda, Nissan). He’d probably like nothing better than for smaller dealerships disappear.

  • avatar
    Gardiner Westbound

    The item overlooks car dealers raison d’être. They exist so manufacturers can avoid dealing directly with unhappy customers.

  • avatar
    gasser

    I saw an ad this weekend for a new Hyundai Tucson lease and my interest was piqued. When I read through the fine print, there was a $399 “nitrogen fill” fee and a $399 “paint protection package” fee. Moral of the story: The current dealers will never learn what people really want; they will just go out of business and be replaced by others.

    • 0 avatar
      CKNSLS Sierra SLT

      gasser-
      Ironically enough, I had a Hyundai dealer try to put a “nitrogen” fee ($299.00 )on the sales contract in the financing office.

      My wife caught it. Had to finance with them to get the rebate. I refinanced the vehicle three months later through our local credit union.

      The thing is we could have paid cash-we are not their typical buyer.

      The particular dealer is off our list forever-and gets bashed on our local community FB page at every opportunity.

  • avatar
    DC Bruce

    Call me old school, but the idea of buying a car — especially a used car — a la Carvana has no appeal to me. Call me touch-feely. First I want to sit in the damn thing. If it passes that test, then I’ll drive it and make a decision about going further. Bringing the vehicle to my house for a test drive, seems like an awfully expensive way to do things.

    I will admit that the “Turkish bazaar” method followed by many of the dealerships I’ve had experience with is off-putting to me and probably totally repugnant to most normal people. But, for me at least, buying a car — new or used — is not like ordering a TV from Amazon.

    • 0 avatar
      stodge

      I agree; I need to sit in the car and explore it before I decide to test drive it.

      • 0 avatar
        ToolGuy

        Here is my current process for purchasing new cars:
        – Sit in the car
        – Take a test drive
        – Run quickly back to my current vehicle and hope it doesn’t get totaled any time soon

    • 0 avatar
      SCE to AUX

      Some (many?) dealers are now offering at-home test drives, and I agree, it must be expensive. But there may be psychological ‘buy now’ pressure if people feel guilty about rejecting a car they have test-driven – similar to today.

      Also, imagine the poor sap who has to drive the Covid-contaminated car back to the dealer after the customer rejected it. They seriously ought to get hazard pay.

      • 0 avatar
        tankinbeans

        Weren’t some or all of the domestic manufacturers offering 72 hour test drives arround 2008? I remember it sounding a bit excessive, but not quite as much so as Hyundai’s no payments for 12 months (I’m curious how that ultimately ended for them).

        As for upending the standard model I’m all for it. If I can tick the boxes I want WRT color, kit, transmission I’d rather that than make the compromises inherent in choosing off the lot. Maybe car makers could stop bundling options together quite so much.

        As far as haggle-free dealing, it makes sense. Most of the big dealer networks in my local area have been on a no-haggle kick for years. The commission for each car sale are flat, at least let the salespeople.

    • 0 avatar
      bradfa

      The one nice thing about these “bring it to me!” online used car sales models for those of us in the salt belt is that it should be much easier to find vehicles which have never seen salt. No longer do you need to fly out and drive back a salt-free car, or hire someone to truck it for you, but now the cost of that transportation (which one would presume is decent at doing its job) is included in the transaction price and shown up front. And if the car is damaged in transport, just don’t sign the papers, the online place eats the transport risk.

      Many of these online places also let you keep the car for up to a few days and if you don’t like it, return it. Sure, you’re going to pay a little more for this ability, but you’re probably going to be more easily able to know if the car will be reliable and fit your needs if you can keep it for a few days.

      If you know what make/model/year car you want, and you know your budget, I think these online/delivery transactions are a decent choice.

  • avatar
    jalop1991

    “showing signs of regression to old, bad behaviors”

    Anyone who’s seen Gordon Ramsay’s Kitchen Nightmares could have predicted this. It’s human nature.

  • avatar
    probert

    Shocking. Saying dealers should respond to consumer desires by listening to them? Some kind of commie or something!!! The purchase and sale process involved in buying a car dips back into the 20th century, with a nod to the 21st. Somewhere in that mess, fax machines and photocopies are used – I found it curious and sort of amusing, many wouldn’t. As far as being able to test drive etc – no reason not to offer that, but for the sale – a few clicks and it should be done FFS.

    • 0 avatar
      spookiness

      I haven’t bought a car at a dealer since 2014, but are they still using dot-matrix printers in the finance office that print out the bill of sale on triplicate carbon copies?

  • avatar
    Tele Vision

    Buy older car. Buy tools. Fix older car when it breaks. Learn things. Enjoy saving both money and environment.

    As stated before we have a 2000 Sierra 4X4; a 2007 CTS-V; a 2010 F-150 4X4; and a 2013 Equinox AWD. The Equinox has only required intake and exhaust solenoids ( actually just exhaust but I replaced both of them, for obvious reasons ) but the the rest have required some parts and effort.

    All four vehicles’ combined sale value wouldn’t buy a new Tacoma but I doubt that I’ve spent more than CDN$2000 on parts over the life of ownership of all four – and that includes headers for the Cadillac.

    • 0 avatar
      CKNSLS Sierra SLT

      Tele Vision-
      What ever works for you.

      We buy new cars and trade them in just before 100,000 miles. I guess this is good for guys like yourself so you can buy and wrench on them.

      Personally-I have what I consider more important things to do than spending evenings or weekends wrenching on cars.

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