SDR Clips: A New Romance: Manufacturers and Consumers

Okay. And so now, now we get to the point. The article that you wrote for Automotive News that I read, and the title is Time has Come for a Grand Bargain on direct vehicle sales to customers. And so I, I've been in a couple meetings with, with executives at, you know, bigger, bigger brands, one, one German brand and one American brand where the conversation is, Chris, what do we do with our dealer body? Because they, they are slow to change. They don't, they don't want to train their people, you know, their showrooms and their systems are terrible. And so there's this disconnect where the manufacturers are looking at Tesla. And you know, I posed this question yesterday on this panel I was on. I said, would you rather have your salespeople selling cars or Amazon's AI?

And the answer is Amazon's AI, right. So Tesla is set up to take advantage of of all kinds of different aspects of the, of the system that they're selling in online because they can use AI, they can market in a different way, they can have a one to one relationship with a consumer with where the traditional manufacturers like Toyota, Ford, gm, Honda, just their advertising is a mess. Right? They'll have national advertising, then they'll have regional and then they'll have local advertising that the dealers do and just keeping consistency and message and all that is impossible to police for them and websites and salespeople and follow up and you know, the, the automotive industry hasn't been great at the basics and executing, just calling people back, greeting people in a nice way, making people feel comfortable and not like they're getting ripped off. Like the industry is failed in, in a lot of that. And so now we're seeing that the manufacturers, although the conversations have happened in private now in public, are, are, are flipping that script and saying no, we kind of like the direct to consumer model and maybe these laws should change. Right?

Yeah. So it's interesting, you know, in the early years of Tesla coming to the market through direct sales, GM especially, but also Ford were in some sense the kind of puppet masters behind the dealers, giving political weight to opposing allowing Tesla to sell direct. For example, in 2014 when Tesla managed to cut a deal with the dealers in Ohio to have three stores in Ohio, GM writes this letter to Governor John Kasich that basically says look, this is unfair to allow Tesla to special deal. And if you think about it, Tesla was eating GM's lunch, I mean starting to in 2014 and obviously now its market cap is more than Ford and GMs combined. And so I think the strategy from GMs perspective was let's slow Tesla down by denying them the opportunity to sell direct, which we know is vital to their model of business. And if we can make them sell through dealers, we can actually keep them out of lots of states or slow them down. I think that was a miscalculation because eventually what GM needed was not to say Tesla can't do it, but we can do it too. And now even in Michigan in the last few months, I've kind of seen a bit of an indication that Ford and GM are willing to switch a little bit, their emphasis from let's stop direct sales to let's make sure that it's available to everyone. GM has publicly said that they think that their dealer network can still be a competitive advantage to them in EV sales, but they need more flexibility than the current system of dealer laws allows them. They need to be able to do some Internet sales, as you said, Chris. They need to be able to work with computer algorithms. They need to be able to have some flexibility on how prices are set, how over the year updates are done and so forth. And so the problem really, I think, that GM and Ford and other legacy companies are facing now is that the existing dealer laws are a straightjacket. And what they need is competitive flexibility to match not just Tesla now. They need to be able to match Rivian, Lordstown, Lucid, Bollinger, Nikola, all this, just the domestic ones and a whole new crop of foreign EV companies coming to market as well. In some sense the politics are shifting and I hope they shift soon. Where GM and Ford have gone from being, let's back the dealers in blocking Tesla to GM and Ford saying, hey, we need to be able to do this ourselves, so what's the bargain we can strike politically that gives us that flexibility?

Yeah, and it's interesting how ineffective that that strategy was for them early on. Like, say, for example in Texas, like I would go to Dallas a lot, I would see more, more Teslas in Dallas where they couldn't sell, then you would in Los Angeles because it was kind of a rebellious thing in a way. Right. Or, you know, you want what you can't have. And so, you know, people, people were buying Teslas there in huge quantities, but.

Could never stop people from buying the Tesla because you could always buy a Tesla from a truck or if you really wanted, you could, like in Michigan, you could go to Ohio and buy one and bring it back to Michigan. They couldn't stop you from registering it, so they never actually stopped sales. What they could do is slow it down. Right? And deny access to lots of people and then creating convenience. Because it's not just sales of service. In Michigan, there still are no Tesla service centers because for the longest time that was illegal. And so that means if you're a Tesla owner in Michigan, you have to drive down to Ohio, by the way, bringing all the jobs to Ohio, all the tax revenues to Ohio, and inconvenience to Michigan residents. It's terrible policy. But again, this was what, you know, Ford and GM backed for a while because at least it had the effect of slowing Tesla down.

Thanks so much for watching this clip of Service Driver Revolution. We're uploading new stuff every day, so make sure you subscribe and click the bell icon so you don't miss out. If you have a question you'd like us to answer on the show, call 8333 Ask SDR and we'll answer your question on the show. That's 8333 Ask SDR. For special deals on our books and training, head over to offers.chriscollinsinc.com that's offers.chriscollinsInc.com I'm Chris Collins and I'll see you in the next video.