Imagine: You head down to your friendly AutoZone or Pep Boys. While you shop for the latest “guaranteed 10 horses more” K&N filter, and the Manager’s Special floormats all the way from Ningbo, China, your incredulous eyes stare at a sign: “New cars at shocker prices! More than 30 brands! Up to 35 percent off!”
It won’t be happening at Manny, Moe & Jack soon, the franchise laws will make sure it won’t. But it’s happening right now in Germany. ATU, Germany’s answer to Autozone, is getting into the new car business in a big way. Indeed more than 30 brands, indeed up to 35 percent off sticker.
Of course they won’t have the 30 brands, with more than 20,000 models and trim variations in stock. You pick your car from a catalog, and it will be delivered to you. How does a Hyundai I30 grab you? €14,232, down from €21,900? Smash your clunker, and the Abwrackprämie will bring the Korean beauty down to €11,732. Come on down! (Hurry! 81 percent of the Abwrackprämien-Money is already spoken for, and the rest is going fast.)
The ATU auto dumping deal has been made able through the European Block Exemption Regulation, the law that blew the European car and after sales market wide open. Anything goes! Dealers? Who needs them! Warranty service? You next branded dealer will—has to—do it. And he will be happy to oblige, because he makes more money on warranty repairs and after sales than on new car sales.
Just to rub it in, ATU calls the offer “Mehrmarken” (multi brand) sales points, running cold shivers down the necks of marketing managers of all European brands who still are busy forcing their dealers into single brand stores, the Block Exemption Regulation be damned.
The ZDK, the industry group of the German auto trade, is watching the matter “with great concern,” writes Automobilwoche [sub]. The “already distorted price structure” of the German market would be thrown even more out of whack.
ATU can use the additional revenue. They had been sold twice to private equity firms at obscene prices, and the debt load is killing them. They have some in-house expertise in selling new cars. ATU CEO Michael Kern was Volkswagen’s sales chief before he left VeeDub to run the repair chain.
You sound like you never heard of Costco or Sam’s Club….
http://www.costcoauto.com/enterzipcode.aspx?gotourl=%2fdefault.aspx
I’m just looking forward to the day when I can buy a new car the way I buy a computer. I choose a type of computer, select one of a range within a type, then customize it with the options and features important to me. The seller offers varying degrees of motivation based on their flow from suppliers, market conditions, etc. etc. The product is delivered to my address within a couple of days.
See the Dell web site if you are not familiar with the model.
How does ATU get the vehicles to sell so cheaply? Do they have special deals with the manufacturers?
comando1: I have, keeping track of this used to be my job. Costco simply sends customers to dealers and gets a commission. Same at Sam’s. The above totally bypasses dealers.
John: Theses are so called “EU” cars. Due to different market conditions and different VAT rates, cars are priced different in the EU. Also, dealers have to make their quota for the year end bonus money. Large brokers take them off their hands. The manufacturers HATE it, but are helpless.
Single Brand stores make comparison difficult and upsell easy.
The only place you can really cross shop easily is an Auto Show.
Still the only major consumer item with no set price and a mandatory dickering session.
Also, in Germany, the showrooms are usually in the city center and the repair/parts located in an industrial district further out. The US Mega-dealer does not exist the same way.
What an awesome concept. I think dealerships could work this way. Keep a limited number of cars on the lot for test drives, or people that want to buy the old way, but offer customers the best deal and order their cars the way they want. The biggest downside most likely being customers that can’t finance the car when it arrives, or people that find something else and skip out on the one they ordered, but one could put those on the lot and sell them eventually, I’d think. It would certainly be a great way to cut overhead via smaller facilities, and it would guarantee that people got the vehicle they wanted every time.
findude
I’m just looking forward to the day when I can buy a new car the way I buy a computer. I choose a type of computer, select one of a range within a type, then customize it with the options and features important to me.
That’s the way you used to be able to buy a car. Want a station wagon with four on the floor and huge V8 and power windows, but no power steering or brakes? Just check the right boxes on the order form and wait for Detroit to build it for you.
That was then. Now if you want a sunroof you have to buy a leather interior first. Want a rain sensor on your windshield wipers? Pay $3000 for a “technology package.” How about somewhere to plug in your iPod? That’s a $2000 upgrade to the audio system. And power seats? You have to upgrade two trim levels and order a “convenience package.”
It’s just a way to make people pay for a bunch of stuff they don’t want just to get the stuff they do.
As someone pointed out above, the Dell model, or better yet, Newegg model, is what we SHOULD have for purchasing cars. I applaud the Germans for being the first to enact such a rational approach to car sales.
I couldn’t believe it when I found out there were laws FORCING manufacturers to sell thru dealers… and all the other B.S. dealer laws. Where’s the “free enterprise” in that scenario?
+1 for newegg model.
Show me all manufacturers/models.
Now let me limit by city rated mpg
Now let me re-limit by highway rated mpg
Now let me re-limit by # rows/seats.
Show all, lowest price first.
What Robstar wrote, plus “free shipping”.
I just got a mental image of a Volkswagen being delivered via UPS.
The delivery dude looks tired, for some reason…
superbad and Frank:
+1
It’s akin to putting a new song on a band’s Greatest Hits album to get the hard core fans to buy it (since they presumably already own all the band’s albums). Of course that was before you could simply steal the music on the intertubez.
The Costco Auto Program does not charge dlrs a commission.That is one reason Costco can pre-arrange significant savings. Costco Auto also has numerous individuals that support the member through the whole purchase process. The Auto program is part of the Service Division of Costco and as such is charged with contributing additional value to membership…not making money on a vehicle sale. It must work …when people become members they stay members. 41M people must see a value in the membership, obviously not just on the car buying part but for household goods and foodstuffs. The Pizza is pretty good and a hot dog and Coke are still $1.50. Go on the weekend and you can make a meal out of the food samples being passed out.
Wolven – you may be more right than you know. The car industry will most likely follow the computer industry in more than just direct sales. Back when I joined the computer industry, most manufacturers would make their own CPUs, boards and graphic cards and assemble their own systems. Now everything is outsourced to specialty contractors – parts, assembly packaging – the whole thing. In effect Dell is nothing more that a logistics and marketing firm and that is also most likely the future of the car industry.
I’ve been told that the majority of new car sales in Japan are build-to-order style, but I don’t have absolute confirmation that is true.
One thing which is really screwed up about the cash-on-the-hood incentive game being played in the US is that it is almost always contingent on buying a car from dealer stock. It is actually better for everyone if a car is built to order. Floorplan costs? Gone. The car comes off the truck and gets delivered to the customer within days instead of aging for months. The customer gets exactly what they want, and it is fresh. No six month or more old battery which has already been jump started too many times. No corroded brake parts, and so on.
The mania for instant gratification has done much harm.
I seem to recall reading that one reason for the quality problems with American cars was that they were custom-made from those huge option lists.
Apparently the heavy customization that used to happen made auto manufacturing far more complex, leading to both worse quality and higher overall prices than the competition.
The Japanese produced both higher quality and lower prices by having fixed option packages.
Now everyone’s doing it and it may be just as much about production efficiency and quality as trying to get you to pay for things you don’t have.
Strange option packages are not exclusive to cars, either. I tried to figure out what Dish Network plan would be appropriate for my girlfriend and it turned out to be amazingly difficult to figure out. There is such a dizzying array of channels, and there is no way to get exactly what you want – you have to accept soap operas even if all you want is sports, and if all you want is soaps, well, you’re stuck with sports too.
The fact that I personally don’t watch TV at all and the fact that my girlfriend was not sure what she wanted were contributing factors, but the sheer complexity of the options, and the poor explanation of them on the web site, was interesting to say the least.
Cars? They look like a model of clarity by comparison.
D
Are there any federal level impediments to this happening here in the US, or is it all state law?
If the latter, one would hope at least one state, somewhere, would be the first to try this out; despite the generally cozy relationship between car dealers and politicos.
And once the ball gets rolling, and the car buying public see the costs / benefits…….
This is the holy grail of auto manufacturing. Establishing a true pull system would drastically reduce inventory and overhead costs. People are already becoming comfortable with purchasing automobiles online, as Ebay, Autotrader, Cars.com, etc show. Hell, I bought my car from someone several states over without ever seeing it in person or driving it.
This is why Penske’s plan for Saturn sucks. The future isn’t the market dealer model, rather it is the no dealer model.
So why do we care if Government Motors dumps dealers?
In the early 1980s during another period of great car industry stress I suggested to my father (then a car salesman) that the build to order model made all kinds of sense. He said it would never happen, because most buyers are impulse purchasers. They want to scratch the itch RIGHT NOW. So far he has been completely correct. Are the majority of US buyers about to mature into more thoughtful and rational people? I doubt it.
It makes no sense to be in a big hurry to take delivery of something you plan to use for years, but people do nonsensical things all the time.
That’s the way you used to be able to buy a car. Want a station wagon with four on the floor and huge V8 and power windows, but no power steering or brakes? Just check the right boxes on the order form and wait for Detroit to build it for you.
Hence the legendary Yenko and other COPO vehicles. Working the ordering codes was an art form.
Back in the 1960s, most dealers didn’t floorplan a large inventory. The showrooms had one example of each model line, there were a few vehicles and demos in stock on the lot and everything else was ordered. Of course, into the 1960s, heaters and defrosters were still optional equipment on many cars.
I’m not sure when the big change happened. The success of Honda’s business model of fully equipped trim lines complete with stereos and air conditioning probably was a factor in the death of option check offs, as was the general growth of the import brands. You can order a car from a factory in Shreveport or Oshawa, but when there’s an ocean passage involved in transporting the car to the dealer, ordering an individual car is a logistical nightmare. Also overstocking at the factory level and channel stuffing after the 1973 and 1979 oil crises also may have been a factor in increasing the number of vehicles stocked by dealers.
You can order an individual unit from overseas, but you face limitations. I was looking for a B200 turbo with manual transmission – I had might as well be looking for a needle in a haystack.
I can order one, but have to wait for the 2010 model run to start in September, and of course be subject to whatever pricing and financing is offered at that time. So much for taking advantage of the recession rates.
@ Bertel Schmitt :
I stand corrected.
Thanks.
Sweet! I want to bypass most of the dealer experience COMPLETELY. Give me a showroom full of cars, let me test drive them, and I’ll order one. I don’t want to talk to anyone but hourly-paid car nuts hanging around the showroom. No sales people, no finance people, no gum-clacking receptionist.