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Dealers mobilize to protect their margins from automaker subscription services

Six individual auto brands — Lincoln, Cadillac, Porsche, Mercedes, BMW and Volvo — have established or are trialing a vehicle subscription service in the U.S. Three third-party companies — Flexdrive, Clutch and Carma — run brand-agnostic subscription services. And three automakers — Mercedes-Benz, BMW, and General Motors — have also launched short-term rental services. Dealers, afraid of how these trends might affect their margins, are building political and lawmaking campaigns to protect their revenue streams. So far, three states are investigating automaker subscriptions, and Indiana has banned any such service until next year. It's certain that those three states are the first fronts in a long political and legal battle. Powerful dealer franchise laws mandate the existence of dealers and restrict how automakers are allowed to interact with customers to sell a vehicle. On top of that, Bob Reisner, CEO of Nassau Business Funding & Services, said, "Dealers and their associations are among the strongest political operators in many states. They as a group are difficult for state politicians to vote against." In California earlier this year, the state Assembly debated a bill with wide-ranging provisions to protect against what the California New Car Dealers Association called "inappropriate treatment of dealers by manufacturers." One of those provisions stipulated that subscription services need to go through dealers, but that item got stripped out when dealers and manufacturers agreed to discuss the matter further. In Indiana, Gov. Eric Holcomb signed a moratorium on all subscription programs by dealers or manufacturers until May 1, 2019, to give legislators more time to investigate. Dealers in New Jersey have taken their campaign to the state capitol, asking that the cars in subscription programs get a different classification for registration purposes. Automakers run the current subscription services and own the vehicles. Sign-ups and financial transactions happen online or through apps, leaving dealers to do little more than act as fulfillment centers to various degrees, with little legal recourse as to compensation amounts when they're called on to deliver or service a car. That's a bad base to build on for business owners who've sunk millions of dollars into their operations.

May 2016: FCA wins, Ford and GM stumble on weak car volumes

The May 2016 sales numbers are in, and it looks as though FCA is getting some vindication for boldly cancelling two slow-selling car models. Meanwhile, Ford saw overall sales dip and GM's May volume took a big dive versus the same month in 2015. While Marchionne's decision to axe the Chrysler 200 and Dodge Dart has drawn criticism as being short-sighted, it's working for FCA so far. Although the Dart and 200 aren't out of production yet and no capacity has been shifted to crossover or trucks, May's numbers show that the emphasis on Jeep and Ram models makes sense right now. FCA's US sales rose 1 percent last month compared to May 2015, putting the year-to-date total at 955,186 vehicles, an increase of 6 percent compared to the same period last year. Standouts included the Jeep Renegade, Compass, and Patriot, and the Fiat 500X. Ram pickup sales were down 3 percent. And your fun fact is that Alfa Romeo sales were up precisely 10 percent, for a total of 44 4Cs sold versus 40 in the same month last year. At FoMoCo, the Ford brand took a hit to the tune of 6.4 percent from May 2015 to 2016, registering 226,190 sales last month. Lincoln showed improvement on its modest numbers, going from 9,174 to 9,807, a 6.9 percent increase. Overall, Ford was down 5.9 percent for the month to 235,997; despite the slump, year-to-date total Ford sales are up 4.2 percent to 1,112,939. Strong sellers included Escape, Expedition, F-Series, and Transit - big stuff. Most small and/or efficient models (Fiesta, Focus, Fusion, C-Max) saw sales slides. Fusion sales were also down, likely due to effects of model changeover to the freshened 2017 model. Ford has promised four new crossovers and SUVs by 2020 and if things keep trending this way the company will be able to sell them, but things could change in the next four years. GM saw the worst of it for domestic brands. Retail and fleet sales were down for each of the four divisions, with the May 2016 total dropping 18 percent to 240,450 vehicles. GM's year-to-date sales are down 5.0 percent in 2016 to 1,183,705. Both the Sierra and Silverado were down significantly, and the majority of Chevy, Buick, GMC, and Cadillac nameplates saw sales decreases, with both small cars and larger utilities included. Not even big stuff could help GM this month, it seems. We'll have more on the rest of the industry's May sales as those figures trickle in.

Cadillac to augment dealers with 700 'boutique' stores

Johan de Nysschen is on a mission to revitalize Cadillac. Since taking over as chief executive of the American luxury brand, the former Audi and Infiniti exec has set about moving the brand's headquarters to New York, switched advertising firms, launched a completely new naming scheme for its model line, and has a whole raft of new products planned. And now he's working on changing how its dealer network operates. Speaking at both the Washington Auto Show and the NADA dealers' convention in San Francisco this week, de Nysschen has outlined a new plan for its US dealers. The network presently consists of over 900 stores – some 200 of which are stand-alone Cadillac dealers, with the remaining 700 attached to other GM brand showrooms. Contrary to earlier fears, de Nysschen notes that the dealer network is larger and covers more territory than those of import brands, and has no intention of cutting that number down. But he is asking those 700 mixed-brand dealers to create a new showroom experience for Cadillac customers. In this latest announcement, Cadillac refers to a new model of "boutique" showrooms that will encompass new technologies, higher-trained staff and luxury amenities to give those attached Cadillac showrooms a more unique feel. The plan includes installing "virtual showroom" systems that will allow potential customers to configure a new car using interactive displays and "potentially even holograms." The plan also calls for "new standards for compensation... with more precise alignment of local sales and potential for each dealer" in order to make sure that the requisite investment in the infrastructure and staff training are worthwhile for the dealers. Just what form these new systems will take, we don't know at this point. Nor are we sure why Cadillac isn't including its 200 stand-alone "flagship" dealers in the initiative. But we're sure we'll be finding out more about de Nysschen's plans on the dealer front in due course. Cadillac Discusses U.S. Dealer Network Development 2015-01-22 WASHINGTON, D.C. – As part of Cadillac's overall mission to expand and elevate within the premium automotive sector, the brand today outlined its strategy to upgrade its U.S. dealer network. Speaking at both the Washington, D.C. Auto Show today, and this weekend's annual National Auto Dealers Association convention in San Francisco, Cadillac President Johan de Nysschen will outline how the brand will target enhancements in the customer experience.