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No Sympathy for the Devil, No Gimmicks

Why has Detroit gotten so little sympathy from the public? Maybe because of all the ridiculous sales gimmicks it has tried over the years—discounts, sales pitches, red-tag events, blown-up monsters on the lot, dealer/factory incentives and so on. Maybe because the buying public has gotten fed up with feeling taken to the cleaners in every car purchase. Maybe because the dealer experience is mostly composed of intimidation and jive—and I can say that from having sold cars for a brief period about 10 years ago.

The worst gimmick is the fiction of MSRP, the sticker price. All subsequent gimmicks flow from this. People are sick of being bombarded by phony sales and traditional dealer pitches about invoice pricing and other lies. Because of the abrupt decline in the new-car market, two-for-one sales are popular now, but they aren’t attracting all that many buyers. A dealership in Miami offered zero-percent financing for 72 months and rebates of up to $7,500, but the showrooms still lack customers.

A variation of the 2-for-1 theme is “buy a car for $1.” That is, after you buy your $40K Chrysler Pacifica, for example, at full price in Chicago, you can get a nice used $12K PT Cruiser for a buck. Two dealerships in Hampton Roads, VA, have opened cafés in their showrooms. Reportedly, the food is good even if the car trade is not.

Business also stinks across the pond, where VW dealers have been offering vinyl graphics to put cutesie art on the sides of their New Beetles. But maybe the most imaginative and ludicrous attempt to lure buyers is BMW’s new touchscreen interface in its showrooms. The presumptive buyer can now slide some tiles around a screen and pick out upholstery and wheel trim colors. Check out the video.

So far, most of these attempts to sell cars haven’t sold many cars. One thing that will have to change is the number of dealers, and indeed the whole dealer system is or should be nonfunctional. NADA, the National Automobile Dealers Association, predicts that about 1 in 10 dealers or some 2,000 will be closing in 2008-2009. The dealer’s position as a middleman is pretty hard to defend in what will be a restructured auto industry. This blog had something to say earlier on that score.

Yet the consequences of dumping dealers could be severe. Wages and salaries of the workforce constitute 13% of the US retail payroll. As independent businesses, they and their communities would be hit hard.

So maybe it’s time for dealers to do some creative thinking about their plight. Instead of concocting more sales gimmicks, how about giving cars and trucks, new and used, away to good causes and taking the charitable deduction in the spirit of Christmas? Do a service for a worthy nonprofit in your community by holding a raffle for a new car. (They are probably hurting more than you are.) Get volunteers to drive people (oldsters, shut-ins, sickies) to their errands and doctor appointments. Offer employee discounts on used cars . . . to everybody.

Build a presence in your community and people will remember when the recession is over.

Tell us about the most effective (or laughable) dealer gimmick you’ve encountered.

—jgoods

Toyota is now selling on eBay! Sort of

I wrote yesterday about my desire to buy a car directly from the manufacturer, and skip the entire dealer fiasco.

ebay_motors I won’t repeat my argument for that here, but instead point out a very interesting fact I recently learned: Toyota is selling cars on eBay. So are GM and Chrysler.

You might ask yourself, “How can this be? I thought there were laws outlawing the practice of an automaker selling directly to the public!” Well, you’re right. Don’t get too excited just yet.

An article here says:

Toyota will be listing its pre-owned inventory on eBay, in a move that will put it on the famous auction site with rivals such as General Motors and Chrysler.

On first read, one might assume that Toyota is listing and selling these cars, which is exciting!

Upon further review, though, I found this blog that goes into a little more detail, basically saying that Toyota’s inventory of cars is searchable, but still must be purchased through a dealer.

At the very least Toyota, GM and Chrysler seem to understand the importance of offering their inventory for sale online. But on a quick search of eBay, all I found were ads by dealers begging for a test drive.

So my high hopes of simplifying the car-buying process are dashed and I’ve decided that by posting on eBay, automakers are just trying to generate more leads for struggling dealers. I should’ve known.

Do you think the car buying process should be simplified? Leave us your comments!

-tgriffith

Will you buy directly from Ford someday?

I’d like to be able to buy a Fusion from Ford like I buy an iPod from Apple.

Of course, no one can order a new car direct from the manufacturer. Unlike the electronics industry, a myriad of state laws prevent auto manufacturers from selling directly to the public.

These laws, enacted in all 50 states, are designed to protect dealers and ensure they are the only avenue for consumers to purchase new cars. In fact, state laws even prevent auto manufacturers from getting rid of brands without paying an extraordinary amount of money to the dealers selling that brand.

olds For example, when GM dumped Oldsmobile in 2004, it cost them about a billion dollars to pay off Oldsmobile dealers because GM had effectively broken their agreement. (Apparently an automaker is bound to keep a brand forever just because a dealer network exists.) It’s tantamount to state-sanctioned organized crime and needs to end.

I would sure be happy if state laws protected the consumer rather than the dealership… but dealers are strong political groups and have heavy influence in state governments. As a result, they’re guaranteed to be the exclusive channel of distribution for new cars AND are protected against corporate brand reduction.

The only thing that can change them is for people to stop buying cars (unless there’s a law against that somewhere too).

I posted a blog here recently discussing the closure of thousands of dealers across the country as a result of just that. Vehicle sales are so far down that dealers are falling left and right, so now is a prime opportunity for the business to finally evolve. Next we need individual states to step up and revise their dealership franchise laws, allowing a consumer to order a vehicle directly from the company that makes it.

As unlikely as that is, if it did ever happen, dealers would exist for the consumers who want a vehicle immediately and don’t mind choosing from in-stock inventory. But the option to order a new Fusion online directly from Ford, in the perfect combination of color, options and accessories, would be there. All while avoiding the dreaded dealer markup.

Automakers would win because they wouldn’t be bound to a bloated, inefficient network of dealers. Consumers would win because they’d have the freedom of choice. And believe it or not, dealers would win because over time their business would become respected, legitimate and honest.

We want to know: Would you rather buy a car from a dealer or directly from the carmaker? Leave your comments!

-tgriffith

Don’t fear collapse

Talking about the loss of Ford, GM or Chrysler scares a lot of people.

It seems like those companies have always been a part of the American economy, so their possible collapse is likened to the crumbling of a major American support pillar. In fact, the entire manufacturing industry in America is on the decline. FOX News recently reported that in Trenton, NJ in the 1950s, 1 in 2 people “made something” as a career. Today that number is less than 1 in 10.

Manufacturing in America will never go away completely. America will always innovate and will always succeed.

A quick example lies in a little American company called Carbon Motors, who sees an opportunity to build a better police car.

Traditionally, police cars are modified sedans built by Ford or GM. Carbon Motors is building a car from scratch with one use in mind: law enforcement.

Called the E7, the car has flashing emergency lights embedded in the frame for visibility and aerodynamic purposes. The front seats are designed with extra space to accommodate an officer’s utility belt. The rear passenger area is sealed off from the cockpit. The back seats are molded plastic for easy cleaning and to prevent prisoners from hiding anything.

And how Knight Rider is this: front-mounted cameras automatically scan license plates of nearby vehicles and alert police when they find a car flagged as stolen or involved in some other crime. Plus the car can detect nuclear and biological threats, all while delivering combined fuel economy ratings of 28-30 mpg.

See? Innovative. I’m not saying that Carbon Motors is the American car company of the future, but they prove the point that there’s always a better way to do things. Ways that may not be as old as GM’s, but are certainly more forward-thinking and better suited for a changing America.

If one of the Big 3 collapses, don’t fear the consequences. Be excited for whatever or whoever comes to fill their gap.

Are you afraid of losing Ford, GM or Chrysler?

-tgriffith

Consumers gravitate to used cars during these tough times.

CarGurus survey reveals a greater percentage (54%) of respondents plan to purchase a used car versus a new car (46%) for their next car purchase.

CAMBRIDGE, Mass., Nov. 24 – CarGurus® (http://www.cargurus.com/), a leading online automotive community, today announced the results of its latest survey of more than 2,500 online automotive consumers worldwide. Fifty-four percent of respondents said they plan to buy a used or pre-owned car for their next car purchase. Only 46% said they plan to buy a new car. Given the tough times and lack of consumer credit, shoppers appear to be turning to the less expensive option of a used car.

Finding Value in Used Cars
“I was surprised to see that a higher percentage of consumers intend to buy a used instead of a new car. However, given the tough economic times, it’s reasonable to see that consumers are looking for value,” remarked Langley Steinert, CEO/co-founder of CarGurus. “Instead of buying a new 2008 model, consumers can save substantial money buying a used, low-mileage 2006 or 2007. Dealers and manufacturers should take note of this trend and perhaps turn more of their attention towards marketing their used-car inventories.”

Survey Results
Across the CarGurus Network, respondents answered the question:

For your next car purchase, which will you buy? (Total Votes = 2,500)
New Car	46%
Used Car	44%
Certified Pre-Owned Car	10%

About CarGurus LLC
Located in Harvard Square, Cambridge, MA, CarGurus LLC is a leading online automotive community founded by Langley Steinert and Nick Shanny, formerly co-founders of TripAdvisor LLC, the 3rd largest online travel site in the world. CarGurus’ founders, board, and investors bring a wealth of experience from such leading web companies as TripAdvisor, eBay, Expedia, and Yahoo. For more information about CarGurus, visit us at www.cargurus.com.

CONTACT: Steve Halloran, Editor, CarGurus LLC
617-354-0068, x12
press@cargurus.com

Will Hyundai save Chrysler and American jobs?

Hyundai could help save American jobs

We’re living in a global economy.

While the U.S. auto industry supplies millions of people with jobs, the truth is that industry is collapsing. All 3 major U.S. automakers are on the brink of financial disaster with their only hope being a federal bailout.

But for Chrysler, there’s hope from Hyundai.

With talks of the grand GM/Chrysler merger now out the window, Hyundai, that little carmaker from South Korea, is poised to sweep in and buy out Chrysler. Or at least part of it.

Just a couple of years ago the idea of Hyundai taking over Chrysler would have been laughable. Now though, it just might make sense.

Had GM succeeded in their bid to takeover Chrysler, it might have worked to keep the company name around but I doubt it would have saved any jobs. A GM that consists of Chevy, Pontiac, Cadillac, GMC, Saab, Buick, Hummer and Saturn can’t even hold on, so adding Chrysler, Dodge and Jeep would only add redundancy and ultimately lead to massive layoffs. Just like a bankruptcy would.

The Hyundai scenario is a little different, because of the redundancy issue. It’s highly unlikely that the Chrysler of today will remain intact because there are pieces of it that will appeal to other automakers. If Hyundai doesn’t absorb all of Chrysler, it could buy Jeep. Nissan has mentioned buying Dodge.

Under a scenario like this, jobs could stay in America though they’d be managed from an office in Asia. And the Chrysler as we know it would be gone.

Cerberus Financial, the current owner of Chrysler, has said they are not interested in selling pieces of the company. But if they are at all interested in saving American jobs, I think they’ll have to.

I ask you: Are you more concerned with saving Chrysler, or with saving American jobs?

-tgriffith

The Pickens Plan and natural gas vehicles

Are natural gas vehicles the answer?

Have you heard of the Pickens Plan yet?

Keep an eye on a YouTube near you, because it’s exploding there.

The idea being pushed by T. Boone Pickens is fairly simple to understand, and I’ll simplify it even more here: To reduce our use of foreign oil, we take our domestic natural gas production and divert it to powering our automobiles. We use wind energy to make up for the loss of natural gas on our national energy grid.

This plan wouldn’t free us from importing foreign oil, but Pickens argues it would bridge the gap until hydrogen or electric powered cars are a feasible option.

As good as this plan sounds, it seems like there’s a fundamental problem with it. It’s the same problem that’s keeping hydrogen from becoming mainstream: places to fill up. See many natural gas stations on your last road trip?

The logistics and infrastructure required to add natural gas filling stations is only slightly less intimidating than building hydrogen filling stations. At least there are already vehicles, mostly in the public transportation domain, that are running on compressed natural gas. Honda even has a CNG car in the Civic GX, but the car doesn’t deliver any better MPG numbers than a standard Civic LX.

I admire Pickens’ drive to create sustainable, domestic fuel for our cars. But this plan is only somewhat plausible in the coming years, when we need a solution that is feasible today.

And so far, nothing I see beats plain old conservation in the form of lighter, more fuel efficient gas and diesel cars while we wait for the next generation of clean auto fuel, whether that be CNG, hydrogen, electricity or something else entirely.

What do you think: Is Pickens a genius or a nut job?

-tgriffith

Toyota iQ: New trend or laughing stock?

Toyota's iQ at the Geneva Auto Show

Imagine living in a country where a car like the Toyota Yaris is big.

That is the direction America appears headed, as our panic-happy society demands immediate changes along with the ever evolving landscape of our economy.

When gas prices were down, Americans hollered for bigger, more powerful cars. Before we knew it, Toyota’s Tacoma expanded from a compact pickup to the size of a Suburban. Then gas prices rose and a backlash erupted against SUVs and pickups, as though the American people are insulted that car companies ever built such massive beasts.

Toyota is again a perfect example of adapting to public outcries and introducing the cars we say we want. So the Yaris isn’t small and efficient enough for you? How about the iQ- a miniscule “4” passenger car measuring 117 inches long (the Yaris is 150 inches).

Though not yet officially slated for a US release, Toyota’s iQ is set to hit the streets of Europe and Japan soon. Success there is assured, though I question whether or not the iQ would be successful in America, especially now that gas prices are stabilizing. Two months ago I paid $4.20 per gallon and just today I filled up for $3.01. Americans could very easily get used to gas that costs three bucks, and frankly I am not convinced that the iQ would sell here if gas remains at that level.

I’ve said it before and I’ll say it again: American SUVs are not dead. What we’re seeing now is America in flip-out mode. Soon we’ll recover our wits, get used to the gas prices and resume our habit of relishing in the rumble of a good ol’ American V8.

The iQ, while a nice piece of engineering and a valiant effort in fuel economy, could become a laughing stock in America. I don’t think the answer to reducing our use of foreign oil is in miniscule gas-powered cars. I’m putting my money on Americans opting for larger electric powered cars, and forking over the costs of keeping their SUV tanks full while we wait for them.

I want to know: how much would gas prices have to fall in order for you to get back into your SUV?

-tgriffith

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