The head of a U.S. automobile dealer group said Wednesday that the franchised dealer model is still the best way for consumers to save money on buying a car or truck.
DETROIT - The head of a U.S. auto dealership group said Wednesday that the franchised dealer model is still the best way for consumers to save money on buying a car or truck.
It should come as no surprise, seeing as Jeff Carlson is chairman of the National Automobile Dealer Association, but Carlson, speaking at an Automotive Press Association luncheon, pointed to "empirical data" to back up his claim.
Carlson said a study by the Phoenix Center shows franchise dealers offer discounts of up to $700 from intra-brand competition.
"We have the data that shows intra-brand competition drives the price down," he said.
In the 2015 study he referenced, economists looked at transactions for ten of the most popular new cars purchased in Texas in 2011, 2012, and 2013. The result showed that for all but one car model, intra-brand between auto dealers competition - in which multiple Ford dealers compete for the same customer, for example - did, in fact, lower new car prices for consumers.
Carlson made the remarks in response to being asked about Tesla Motors, which sells its electric vehicles directly to consumers, often using shopping mall storefronts in lieu of traditional dealer lots.
Tesla's model is banned in Michigan, along with Utah, Texas and Connecticut. And earlier this month, the state rejected Tesla's application for dealership licenses.
In response, Tesla has sued three of Michigan's top government officials, alleging the state's ban on its direct-to-consumer sales model is unconstitutional. The automaker is requesting a jury trial.
At any rate, Carlson argued that Tesla's "vertically integrated" model means the company always sells its vehicles "at retail" prices.
He pointed to recent news reports saying company CEO Elon Musk told his employees there should be no promotional deals on the wares:
"There can never -- and I mean never -- be a discount on a new car coming out of the factory in pristine condition," Musk wrote. "This is why I always pay full price when I buy a car and the same applies to my family friends, celebrities, no matter how famous or influential."
Carlson also said Tesla's direct-to-consumer model only works because it's a low-volume automaker.
He said Ford Motor Co. can produce 700,000 pickup trucks, have the truck already sold as it comes off the assembly line, and then rely on dealers to manage inventory.
"That was the brilliance of Henry Ford, he went ahead and said, I'm going to deploy my capital into producing vehicles, I'm going to find a lot of guys that will know the market, take the risk, the inventory risk, the marketing risk, the training risk, and the holding-of-the-used-vehicle risk, and I'm to name them dealers," Carlson said. "And here we are."