Taking the Model T analogy (a million of one thing versus one million different things), if there were only one place to get a car, the price would be higher. Having 75% of current dealers selling cars means less competition between sellers of each model, makes it a little more difficult to shop and haggle on the price and (with hope) raises the price paid on each car. While the remaining dealers would see any immediate benefit, in the long term the manufacturers then have to incentivize less. It's somewhat of a stretch.

like the instant price comparison and efficiency the internet has brought to say, books, the auto industry needs to accept new changes to purchasing. more frequently it is by brokers, internet customization etc. the pattern is clear, physical dealers become less important in the purchasing role.
also, I've never understood the "siamese" products matrix/vibe, mountaneer/..., (there's another I can't remember that has 3 equivalents), excort/tracer etc.
Minor "luxury" changes should stay in one product family. clear and distinct changes are appropriate for say, toyota/scion/lexus, but the way the us auto industry passes off essentially the same model as different cars is ridiculous.

I can see how having fewer dealers will be good for the remaining dealers, but I still don't see how having fewer dealers helps the manufacturers. If a dealer is an independent business, then how does a dealer cost the manufacturer a dime? Rather, shouldn't the dealers be paying franchise fees to the manufacturers?

I'm sure that there is something about the business model that I don't understand, and I would love an explanation.

Dear Mr. Solman:

You state, "No, dealers cost GM (and other automakers) plenty -- largely because of state laws that prevent the manufacturers from cutting them off." This statement is just the type of thing I keep hearing, but it is just that, a statement and not an explanation. How does preventing the manufacturers from cutting dealers off cost the manufacturer anything? What if any other costs unrelated to the state franchise laws are there?

Your statement and one made by one of the manufacturers' representatives testifying before Congress the other day provide no enlightenment on this issue. The car guy said that dealers cost the companies a lot of money. A Congressman asked for specific examples and the car guy could not provide one.

I love your reports and learn a great deal from them, but I still have nothing but your statement above on this question and still have no understanding of how the existence of one or thousands of dealers cost the companies when as I understand it, the dealers buy the cars from the companies and are independent businesses.

Sorry if I am being obtuse.

I'm with Roy and Thomas Hanley (above). I still don't understand how the dealers cost the manufacturer. In my simplistic understanding of the relationship, the dealers buy cars from the manufacturer. As I understand it, they pay their own rent, pay their salesmen, etc. They even have to arrange their own financing ("floor planning") to carry the automobile inventory. I suppose it is asking a lot, but could we get someone at the automakers to list some of the major costs the manufacturer incurs because of the dealers? Maybe an example with some numbers?

I had hear at one time that the auto manufacturers believe that a substantial portion of the cost of what a car buyer pays for the purchase of a car is due to the cost of the dealer and that at some point in time there had been some consideration given to the idea of eliminating all dealers, selling direct (over the internet) and arranging warranty service through independent chains. But that idea was never seriously pursued for many reasons.

Thanks