In many retail sales arenas, product manufacturers are seeking to lower costs and appeal to consumers by offering products directly to individuals. Auto manufacturers are no exception, but as Consumer Affairs reports, California has franchise laws that protect auto dealers from this type of unfair competition from the manufacturers.
One law prevents a manufacturer from competing with its own dealerships, but there is a loophole: The manufacturer can sell vehicles directly to consumers if there is not a nearby dealer competing for sales. However, the primary manufacturer taking advantage of this loophole, Tesla, may be violating other aspects of the law by performing prohibited sales activities at its galleries, according to the president of the California New Car Dealers Association.
Another manufacturer tactic that bypasses the dealerships is the online subscription service. The CNCDA has filed a complaint with the state’s New Motor Vehicle Board against Volvo’s subscription program, which offers a vehicle with most maintenance service included, as well as a concierge service and auto insurance coverage, for a monthly subscription fee.
According to Teslarati, dealerships are involved in the program, but their role is limited. They enter the picture only after the buyer chooses the vehicle from the app or website and receives financing directly from Volvo’s financing branch, then finalizes the package with the financial agent. The dealership does not enter the picture until the buyer chooses where the vehicle will be delivered.
Before the dealership provides the vehicle to the buyer, the dealer takes care of the final steps: handling the sales contract and the payments. The result for the dealership is often missed opportunities for sales from package add-ons and financing services.