Pub. 58 2017-2018 Issue 2

33 WINTER 2017 OUR COMMITMENT TO OUR CLIENTS: ‡ You Won’t Lift a Finger: Armatus does all the work for you. ‡ Fully Contingent Fee: You only pay when you are approved. ‡ Speed and Accuracy: Money in your pocket as quickly as 45 days. ‡ Date Governance: Your customer information is safe with us. RETAIL WARRANTY REIMBURSEMENT ON AVERAGE WE ADD $168,000 TO A DEALER’S BOTTOM LINE WE ARE ENDORSED BY 12 STATE AUTO DEALER ASSOCIATIONS WE HAVE OVER 3,300 SUBMISSIONS APPROVED WE WORK IN 40 STATES WITH 24 MANUFACTURERS (888) 477-2228 | info@dealeruplift.com WWW.DEALERUPLIFT.COM larger installed service base, 35 but for now at least the system is intact and customers seem very happy. As a result, it is generally expected that newentrants (various Chinese EV companies, Elio, others), who lookmore to SiliconValley than to Detroit for role models, will at least launch thisway.And, as one person put it, since “They have more money than God,” these firms can afford to follow this path for a long time. 36 And also, customers, trained by Amazon et al. to be more comfortable with online interactions, arenowadaysmore at home with the online interfaces that a factory- direct system would probably employ. • Second, even incumbent OEMs will always be tempted to push in this di- rection, for the “closed loop” control of the customer experience they believe is necessary (especially for premium, expensive cars). One can argue as to whether the OEMs will be better at managing customers than dealers, but the urge is always there (see GM’s Fac- tory Pre-Ownedmove in this direction, if only with used cars, and see again the Hyundai Genesis Canada experi- ment). But as one OEM executive put it to us – anonymously of course—“The control argument for factory stores gets weaker every year.We have increasingly tightened control over dealers, from facilities to websites to processes and more, using non-margin payments to get them to toe the line, and advanced IT to monitor their every move. If we have such control now, why would we want to spend the money on land and buildings and inventory, just to get the next few degrees of it?” However, as mentioned above, even if there was more movement to direct systems, our interviewees believed that dealers (and theirOEMs) would respond and adapt, leading to a convergence of systems – at least from the perspective of the public. Thus if factory stores were gaining more ground, there is nothing stopping BMW or another OEM from working with its dealers to open (Tesla- like) sales or display points in mall loca- tions also (exhibit). 37 It is unlikely the 35 See for example calculations about already-long wait times for Tesla service appointments, at http://bit.ly/2eykkFB (Tesla Motors Club analyses by TMC member “Troy”). 36 Note, however, that there has been a lot of speculation that Tesla is using owned stores because they are more easily disposable. That is, if the various firms led by Mr. Musk continue to pivot more towards making batteries and solar cells than building up the car company, they can more quickly achieve his goal of ramping up EV penetration by selling the car divi- sion of Tesla to another OEM (which would have a pre-existing global production network into which Tesla cars could be quickly inserted) – and this transaction would be easier to execute if there were not hundreds of dealer contracts to renegotiate with a purchaser. There was also speculation that Mr. Musk might keep the car factory, but sell the stores off to a large public dealership chain to run, which again would be easier to do with Tesla owning the stores. This is of course all speculation, however. 37 Subject to local laws, of course. BMW image fromwww.bmwblog.com ( http://bit.ly/2ciVWtW ) And just for fun, take a look at this conceptual “vending machine for cars,” apparently dreamed up by Studebaker in the 1950s. One wonders if such diversions hastened the company’s demise (image from “A Machine That Sells Cars,” Business Week, April 17, 1954).  DEALERSHIP OF TOMORROW — CONTINUED FROM PAGE 31