As I enjoy my first cup of Lipton tea, I browse the electric car sub-reddit every morning for interesting developments in the EV world over the past 24 hours. I recently found one that I want to share with our readers. Here is the original post from Reddit user (and Audi e-tron owner) David Maybury looking to buy a new Mustang Mach-E:
“We had selected the car, submitted an offer for our trade-in from CarMax and my own financing offer. The dealer could give me a better interest rate, that’s just as good, but the payments didn’t seem to add up. So I asked for the breakdown. At first they “forgot” to include the trade-in and then they said they couldn’t keep up with CarMax. (Seller had said they would). Fine. I will take it to CarMax.
“Then you have that” Did your salesperson talk to you about pricing? “and admitted they had marked the car at $ 5,000. But there was a $ 1,600 discount. I told them I wouldn’t pay a dollar markup. They added another $ 3,000 discount and increased the net markup to $ 400. So I told them we were out and went. They went out of their way to get us to stay where I was starting to get pissed off. They made one last call to GM that didn’t get the $ 400 wanted to let go, so I went.
“Driving from Riverside to Culver City in rush hour (well over an hour) to get this treatment was aggressively not worth it. I’ve reserved one more with a dealer who promises to be better behaved, but I’m considering my options now. I just had to bleed a little. “
Maybury’s post received over 365 comments, many from people who have had similar experiences with other retailers. The problem is by no means limited to Ford dealerships. There are even some of Tesla owners who have found their buying experience to be slightly inferior to the “no-consolation” process the company promised.
In theory, Ford is putting pressure on its dealers not to pull these “market-adjust” materials with Mach-E buyers. Mark Levine, Ford’s director of communications, recently posted a tweet promising to assist all Mach-E buyers with dealer markup issues. He also takes the opportunity to get a shot at Tesla, but that’s fine. I guess that’s his job.
Any Mach-E customer who sees a dealer adding markup can reach out to me. I will help you find another dealer. Good luck reaching out to Tesla to get your FSD.
– Mike Levine (@mrlevine) March 21, 2021
Maybury tweeted Levine but hasn’t received a response yet. In an update to his original post, he reports similar gimmicks at two other Ford dealerships he contacted. Part of the problem could be that he lives in California, the ground zero for the electric car movement in America. Would anyone in Peoria or Poughkeepsie have similar problems? If you have anything to add to this story, please let us know in the comments section.
Dealers are in for the money!
Horror! It turns out that car dealerships are in for the money. Who would have thought? As strange as it may seem, there isn’t that much money to sell the cars yourself. The real money is earned in the service department and in the tax office. Oil changes, brakes and tires are profitable things. As are the commissions that credit unions and financial firms pay for the business the R&I departments send them. Primer, paint protection (cue the famous Fargo scene), LoJack, extended warranties – these are just a few of the extras retailers rely on to stay profitable. Then there are all the bizarre financial deals between the manufacturers and the dealers that can affect the dealer’s bottom line that few customers are aware of.
You can bring The Incredible Hulk to negotiate with a dealer, but you are an amateur. They do this for a living and have a whole checklist of sales techniques that have been perfected over decades. Dealer schools run by NADA and others actually teach dealers how to withdraw the maximum number of dollars from each customer. Whatever strategy you have, you’ve heard it all before and received an answer worked out years in advance. They do this 7 days a week. You do it every three years or so. If you’re a weekend tennis player and you play Serena Williams, who do you think will win?
In the bad old days, a salesperson would ask for your keys as soon as you walked in so he could “rate your trade”. At some dealerships, they actually threw the keys on the roof and said you had to buy a car from them to drive home. Things are not quite as wild as they are today, but the customer is definitely at a disadvantage in most new (or used) car negotiations.
An opposite view
Last month we wrote a story about how dealerships are a major roadblock on the path to the future of all electric vehicles. A person using the Disqus username DealerVoice posted a comment on this story defending the dealer model and its industry. I give him a lot of credit for going into the lion’s den. Every story has at least two sides and we rarely get input from actual traders. Here’s what he said in his comment:
“Thanks Steve for this article. As the owner of a family business that spans 4 generations, I can assure you that it is not the dealer who hinders the sales of electric vehicles. We welcome the change. We have invested in EV displays, technical training, charging stations, etc. I think you give us more power than we actually have. Transportation in America is a SYSTEM that depends on roads, fuel, service, etc. If you drop the square pin which is an electric vehicle into the round hole of the American ICE private transport, it will result in a slow adjustment.
“The fact is, the majority of Americans don’t ask for electric vehicles … and it’s not the dealers who make those millions of ICE vehicles every year. We sell what is available and what is in demand and wait when they break and we put them on the market. And if they are not independent dealers, there will be factory-owned stores that operate on the same model as a traditional dealer and sell ICEs. In this scenario, the consumer will only have less power and price competition will be reduced (no intra-brand competition between dealers).
“Instead of pointing your finger at retailers, ask the following questions:
1. Can the Average American Afford an EV?
2. Do you have the time to wait 30-45 minutes for a pure stream to charge?
3. DO you HAVE a residence where you are willing to put money on a charging station?
4. Does an EV suit your needs? How long do you commute?
5. What is the USED Secondary Electric Vehicle Market (by the way, this is where most people buy their cars in America)
6. What are the replacement costs for a battery in an electric vehicle? What is the value after 10 years
7. What is my electricity bill in a world of ALL electric vehicles? Who do I pay?
“Most EV buyers who visit our dealerships ALSO own an ICE vehicle. The EV is a second car, a toy – because when they have long journeys or the EV can’t be charged, they know they can start the old reliable ICE and get the job done.
“So the REAL ((BA)) RRIER is a consumer demand. Traders don’t create demand … they create it. Manufacturers now claim that all EV models are intended to simply increase its stock value in response to Tesla’s strangely high market cap value. But Ford GM and others will do ICE as long as it makes ECONOMIC sense.
“Dealers sell cars because people need convenient, private, affordable transportation … and they could drive fewer cars, which drives the wheels. ICE petrol or EV COAL-based electric … ..
“Many Thanks”
Again, I give this person good marks for taking the time to explain their position. I’ve been in auto-bidness myself for a few years and know the people I’ve worked for, an ethical operation that didn’t stop them from making a living. Have we offered our customers paint protection and LoJacks as well as extended warranties? Yes we did. Some bought them and some didn’t, but they weren’t strong enough to buy them. During my 5 years with this company, no “market adjustment” was applied to the EIA on any car. Not one.
Beautiful new world
It’s not about whether Ford (or other dealers) has the right to feed their families. The problem is that EV buyers are entering into a new experiment and are very resilient to the old methods. Apple doesn’t negotiate the price of its iPhones and iPads. Amazon does not negotiate the price of the products it offers. Best Buy does not negotiate the price of its digital TVs. People who are used to doing business online expect to be treated in a certain way. The traditional dealer model hits them like in the last century and is at odds with their needs and expectations.
The EV revolution is just as sure to disrupt the conventional dealer model as it is the auto manufacturing business. The traders who thrive will be the ones who recognize and embrace the new market realities. Some established auto companies will go out of business as electric vehicles increasingly take over the market. It is inevitable. And some well-established dealers will also go out of business.
It doesn’t have to be like that. The only constant in life is change, and those who refuse to recognize this principle are doomed to fail. As Bob Dylan would say, “Your old street is aging fast. Please get out of the new one if you can’t help because times are changing. ” And so it is.
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