[vinay427]

Correct me if I'm wrong, but I believe the original rationale behind requiring cars to be sold through dealers was to regulate the market and create competition among different dealers. Without that requirement, manufacturers could easily undercut dealers due to lower overhead. I'm not really sure what the point of car dealers is, but they have somehow found a way to prove themselves "necessary" to some lawmakers in some states.

[TAForObvReasons]

> I'm not really sure what the point of car dealers is

From a DOJ analysis:

> Auto production is a capital-intensive business and a franchise system allowed manufacturers to concentrate their resources upstream while accessing capital through franchise fees from independent entrepreneurs at the retail level.

Given capital availability and resources at the time, it made sense for the auto makers to franchise.

https://www.justice.gov/atr/economic-effects-state-bans-dire...

[whamlastxmas]

Not sure why you're downvoted. This is the first rational explanation for this I've ever seen - thanks. Doesn't really justify it still existing today, but makes me hate the system a little less.

[TAForObvReasons]

I'm not surprised, anything that doesn't toe the Musk/Tesla line is usually met with downvotes here (already -3).

[whamlastxmas]

Musk is pretty divisive here to be honest. I see tons of anti Musk comments. I assume from your tone you aren't a fan of his, so I think what we're both seeing is confirmation bias that everyone is against our opinions.

[fma]

It's a rationale explanation and I see a part of it. It's not like McDonalds, where they have a corporate owned store and a franchisee store. Any price difference would be measured in nickels and no one is going to drive to the other side of the city to buy a burger. But if a corporate dealer can knock off $1,000 on a car just because there is no middle man, I can see why no one would want to franchise a dealership.

It's stuck between a rock and a hard place.

[vinay427]

Thank you for responding to my confusion with this excellent article. It is intriguing to me that increased information on pricing and availability through the Internet has already eroded some of the benefits of dealership regulation. Perhaps they are a dying breed even with protective regulation that at least in the past proved mutually beneficial for automakers and dealerships.

[mikeash]

If that were true, then they wouldn't need laws forbidding manufacturers from selling directly.

Dealers love to tell us how useful they are, but then they turn around and lobby for their privileged position to be enshrined in law and enforced by the government. Does not compute.

[rebootthesystem]

Dealers must provide value. Using laws to "create" competition is foolish and wrong.

If there's no value in me buying a screwdriver set from Home Depot I should be able to buy it from anyone else, including the manufacturer.

In other words, there's no fundamental reason or "right" that says a dealer must exist between a manufacturer of a good and the consumers of that good. Forcing such a structure is artificial and causes problems.

For example, lots of people hate the car buying experience and dealing with a "mafia-like" (as a friend put it) dynamic between hungry commission-based sales people and the manager in the back. The whole process is disgusting. It took three hours to get out of the dealer last time I bought a car and it was a brawl to not get screwed.

[whamlastxmas]

I hate dealers too and hate this law, but read this[1] comment that is a sibling to yours. It explains why this law exists. It's a shame it hasn't been removed yet because it is quite dated at this point.

[1] https://news.ycombinator.com/item?id=12564578

[rebootthesystem]

As a manufacturer I am very familiar with the distribution model. Dealers do create an opportunity to have a smooth flowing supply pipeline as well as inventory distributed near consumers. They make money, you make money. The difference is that in my business I have very tight controls over what my resellers can do and how they do it. The government doesn't get involved.

In the auto business dealers can be horrible places to walk into. The other day one of my friends at the gym bought a used car. She got royally screwed. I didn't tell her because it'd break her heart. They did the old "let's talk about the monthly payment" trick. She is mathematically challenged and couldn't have managed the stream of information during the negotiations. She will be paying $24K for a $10K purchase.