THEIR DIRTY LITTLE SECRET

THEIR DIRTY LITTLE SECRET

When I began selling cars in 1976, I was just going to do this until I found a good, respectable job. I became a record-setting manager, holding every top management position in the variable operations of some of the most successful dealerships in the business.

As an executive manager, I became a consultant, nationally recognized professional speaker, award-winning magazine columnist, and somewhere along the line, I became known as an extremely accurate industry futurist. I’ve called it right dozens of times when all of the other experts were screaming that I was crazy. Five years ago, when I began writing and speaking about a loosely woven plan by some of the manufacturers to completely get rid of their franchised dealer partners, once again I was criticized and crucified by a chorus of disbelievers. Two years ago, when their plans became clearer and more precise, I began to write about what the manufacturers and a coalition of rogue vendors were planning to “Slow Boil The Frogs” (Dealers) … especially General Motors and Ford. For years, I was Ford's biggest cheerleader.

They’re facing many obstacles transitioning away from the “Dealership Model” and it is important to keep the dealers as calm as possible until they are ready to completely sever ties. In other words, they still need the dealers to finance the transition.

One strategy they’ve successfully employed is to get the General Public onboard with the illusion that the car-buying experience through a traditional dealership is the worst experience they’ll ever have in their lives. They’ve created the illusion that the processes are unnecessary and that dealerships are taking advantage of the customers with unreasonably high profits and markups.

For years they’ve all used the Rogue Vendors advertising to increase the illusion that dealerships are evil. CarGurus, CarFax, TrueCar, Edmunds, and a chorus of others spent millions of dollars, maybe billions, telling consumers how bad the experience is and how much we overcharge. Carvana and Vroom even went over the top with that message. Dealers have paid all of these vendors to damage our reputation with the customers.

 Now, with the inventory shortage, the problem has escalated because dealers are marking up vehicles thousands above the MSRP window sticker price. Of course, the manufacturers never complained when dealers were forced to lose thousands of dollars with excessive inventory that wasn’t selling.

 Manufacturers pressured dealers into building these multimillion-dollar facilities designed to sell 200 new vehicles and now dealers are getting 70 – 80 new cars a month. Dealers are marking up cars and trucks because they haven’t got enough inventory with the shortage to remain profitable, BUT what nobody ever mentions is exactly how much do the manufacturers make on the cars and trucks people are buying?

 What Ford (GM and Stellantis) all fail to mention is how they unconscionably make outrageous profits and how they take advantage of customers on net profit per vehicle. They’ve diverted the blame to the dealers, But I’ve never been able to pin down exactly how much they make per unit sold. These figures are masked and difficult to pin down.  There are a lot of guesses and estimates and conjecture, but I’ve never been able to pin down the exact figure. IN 2016, last time the figures were publicly analyzed, the profit per F150 was at $13,350.00 average per unit sold.

This year all the big three (Ram, Silverado, and F150) came in right at approximately $17,000 average net profit per truck. However, take the $60,000 King Ranch F150 for example, IF the dealer sold it for full MSRP, the sale only paid the dealer slightly less than $4000 profit.

 AND, with Cars and other vehicles, take the Mustang Mach E for example ... If a Mach E is sold at full MSRP, the dealer loses money. Invoice with holdback and destination factored in is at zero “0” dollars, no profit. However, our most reasonable estimates say that the manufacturer makes something like $8000 on the sale of every Mach E.  I'd love to see and accurate figure, I suspect it is even higher than that. I was deliberately conservative. I'd love to know an accurate number.

 Here’s what the manufacturers, every one of them is doing, that some reasonable people make interpret as “The Manufacturers are the Ones Cheating, Abusing, and Gouging their Customers”.

 When Ford and other OEMs saw that the dealers were successfully marking up the vehicles, AND they saw the customers were paying it, THEN all of them jacked up the prices on the units’ MSRP from $3000 to $5000 average, as much as $11,000 a unit price increase that I’ve seen. SO, while they’re acting pious and self-righteous about the dealers marking up the vehicles, the manufacturers are right in there, grabbing a seat at the table, marking up the MSRP to take that profit away from dealers.

One dealer tells me that he ordered a 2022 Silverado 3500 for a customer in June that was an identical clone to the vehicle he bought in January, both trucks are a 2022 model year, The MSRP on The New Silverado is Nearly $11000 More, marked up from January to June. Only 5 months difference in time, exactly the same truck, GM jacked it up $11000 more. The cost of materials increase was nowhere near that predatory price increase by the manufacturer.

 The manufacturers do All of this in spite of the fact that dealers have the heaviest expense of retailing the Trucks. AND don't fall for that crap when they say that they did it because of the increased price of materials. That $17,000 per unit net profit per unit, best estimate, and cost of materials increases are already factored into the equation.

 SO, not now and it never has been about caring about their customers, it has always been a money grab by all of the manufacturers. If they successfully go to the “Agency Model”, Consumers will pay a lot more than they ever did with Dealers, and the Customer Experience will go straight to Hell if People believe the false smokescreen that these manufacturers really care about them. #AlphaDawg