AD #1481 – U.S. Diesel Sales Strong, Brussels Chooses China EV, Production Booming in NA

October 17th, 2014 at 11:33am

Runtime: 6:33

- U.S. Diesel Sales Up Strong
- BYD’s EV Beats Out Renault/Nissan
- North America Production Booming
- Chevy’s SEMA Concepts
- Kia’s Soul EV Ice Cream Truck
- Lebron James Becomes Kia K900 Ambassador
- NADA Defends the Franchise System

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60 Comments to “AD #1481 – U.S. Diesel Sales Strong, Brussels Chooses China EV, Production Booming in NA”

  1. G.A.Branigan Says:

    I really believe that once GM releases the midsize diesels,they will have a runaway hit on their hands.About damn time too…

  2. Bradley Says:

    Wow!

    If a car company owned a dealership and they didn’t want to do warranty work, then guess what Consumer backlash. Consumers are dumb, but not that dumb!!

    11 Million Dollars BULL SH!T! That is some funny math.

  3. Bradley Says:

    Our local dealers could car less about cars. All they care about are themselves, hence why they love to put their name on the dealership and scare the cars they sell with their name.

    Maybe…if you had a dealership on an acre of land, with a million dollar building and 100 cars on the lot. You add all that up, and not take into account loans, etc. Then maybe you come up with $11,000,000 in a dealership.

  4. Buzzerd Says:

    Bradley- you’re saying 11mill is wrong because?

  5. Buzzerd Says:

    Bradley- a million dollar building is a fairly small place

  6. HtG Says:

    Did I miss the part where the NADA boss explains how it’s good for consumers to have the dealer markup the financing from wholesale to retail? No Buffet isn’t stupid, he’s looking at the financing and the floorplanning. You really think Banjo playing, Dairy Queen owning everymen from Nebraska via Wall Street really want to buy into a low margin business like car franchises?

    2.5% margins on sales, my fat ass. Did you notice the NADA boss used the same language as Kravchik when he appeared on AAH? How much margin after they low ball the trade in? What’s the cost of capital for floorplanning your inventory? Does the NADA double talk include hold backs? How about local TV advertising help the dealers receive? Notice he didn’t answer on Chinese cars?

    Lord, I need a drink before I watch the rest of this week’s Autoline.

  7. Chuck Grenci Says:

    On dealerships: His statement said 11 million average, which I have no reason to disbelieve; so that being said there are many that have much more invested. With the costs of vehicles today it wouldn’t take too much to achieve that figure, and adding the other durables (as building, property, inventory, service department, i.e., tools, diagnostic and repair equipment). Sure some dealers are lacking in sincerity, but the one’s that want to remain in business (and prosper) are mostly doing it right.

  8. pedro fernandez Says:

    In my 62 yrs, I have never felt that ANY dealership had my best interest in mind, perhaps if I dealt with a high priced one, things would be different.

  9. HtG Says:

    Why in the world do I need some monkey to key in my SSN so I can see what financing offers there are?

    Why can’t I buy a new car from my own computer and pick it up at a dealer and get it serviced there?

    How does dealer holdback make cars cheaper for the consumer?

  10. HtG Says:

    The dealer does have a large inventory of grey cars available to drive home today.

  11. Buzzerd Says:

    Htg- because generally speaking people are dumb and will screw something up and expect the seller to pay for there mistake. It still happens but less so with a live person trying to guide them.

  12. HtG Says:

    11 troo.

    But syriousl, the real question is Return on Capital. None of this 2.5% of sales crap

  13. Jack Hundertmark Says:

    %10 – Believe you have a better chance of a high price range dealership taking more money out of your pocket than addressing your best interest.

  14. Jon M Says:

    Dealer holdback doesn’t make cars cheaper for consumers. It’s an incentive from the manufacturer to the dealer. It’s goes on the books not on the invoice. I don’t think there is a dealer out there that will let anyone know (i.e. give up) about that incentive. It does, however, help dealerships convince you that they’re selling you a car at invoice, when really they’re not. Some vehicles may not have a huge mark-up, but rest assured there are numerous incentives given to dealers with love from the manufacturer.

  15. Todd T Says:

    Dealership investment: I know of dealers with 10 times that amount invested in their operations. So, no, nothing “funny” about the math. In the glory days, the franchise was going for a minimum of 10 million in blue-sky alone.

    I’m not sure how successful GM will be with the midsize pickup diesels, I’d like to think they’d be a home run, but it is GM, so we shall see. If their performance with the Cruze Eco Diesel is any indicator, I don’t see how success can be a foregone conclusion.

  16. HtG Says:

    Someone needs to explain to me how it matters at all if I buy from the OEM or a dealer as far as taxes are concerned.

    Please talk slowly. Are you going to say that lower costs will mean lower tax receipts? Prolly don’t want to use that argument.

    No, the dealers pay off the politicians at the state and federal levels. ding ding ding ding

    Hey, is there a reception tonight at the Hay-Adams Hotel in honor of Representative Steve Scratchback?

  17. Bradley Says:

    Everyone thanks for educating me on the 11 Million. I am not sure how that fact really plays into the argument pro or against franchised dealers.

  18. HtG Says:

    ooh ooh, I have another!

    What are my chances of opening a Chevy dealer a mile from an existing Chevy dealer? Wouldn’t it increased intra-brand competition and give better prices to the consumer?

    Nope, dealers have arrangements to keep out of each others areas. You prolly don’t want the govt looking to closely at what happens with large dealer groups that carry multiple brands, either.

    Sean, is it safe for me to watch the second half of Autoline, or should I wait for happy hour?

  19. HtG Says:

    OK, let’s ask Johann deNysschen if he’d like to have factory trained and employed retail staff selling Cadillacs.

    OK, rhetorical question

  20. HtG Says:

    No, Elon, please don’t answer for Johann. Hey, you guys know each other?

  21. aliisdad Says:

    Having purchased many new cars over the years, and having a marketing background, I can only say that car dealer’s sales practices have brought on their own troubles and bad reputation… Frankly, I don’t see how their pressure and trickery still work at all with modern consumers that have all the new options to purchase cars.. I put car salespersons in the same league as TV preachers, pimps, abortionists, drug dealers, etc..
    the way they operate is not what most successful “modern” sales professionals
    practice, these days!! Hopefully, the new ways to purchase cars will continue to grow, and the NADA will work more on “professionalism” in selling as opposed to protection of dealers of questionable ethics…
    Just getting a quick “buy it today” sale is a short term success, but selling someone on the car that is really right for them, and looking forward to gaining a long-term and loyal customer is a lot more sensible…and profitable.. That kind of sale takes more work but pays off both a sale now and hopefully a customer that will come back again that you do not have to re-sell to again… The sales to that happy customer could pay off for years… That is modern marketing, and successful sales practice..
    It seems like you often see a lot of new sales people at many dealerships.. I wonder if this turnover is due to the sales practices that they are expected to do as opposed to having repeat customers who consider someone to be their “car salesperson” almost like your lawyer, hair dresser, or any other professional that you trust and depend upon..
    Again, they brought the poor reputation upon themselves…Hopefully, they will wise up so it will be enjoyable to purchase a new car instead of having the joy of a new car diminished by what you had to go through to purchase it at the dealership…

  22. Buzzerd Says:

    I suppose we can compare this to a company like Apple lets say. Do you shop online or at a store when and if you buy there product? I prefer to shop at a store at our local university ( no apple stores around here) I prefer to go there because I get to speak to a live person and see the product in person and the people who work there know their stuff.

  23. HtG Says:

    GM’s friday afternoon dump

    Reuters reports that GM lead lawyer Milliken will retire.

    http://www.reuters.com/article/2014/10/17/us-gm-recall-lawyer-idUSKCN0I61Y220141017

    nice timing, RenCen

  24. C-Tech Says:

    Hmmmm. Why do I care how much Cash F. Millionaire sunk into the dealership? So what if they spent 11 million, I came to buy or service a vehicle, not admire the tile.

    I have yet to see ANY dealer fight for the owner against the OEM’s when it comes to warranty claims.

    It is true that an OEM owned dealership would hire fewer workers. No need to hire useless family members anď give them guaranteed jobs.

    If the dealership system is so superior, then it should NOT need legal protection to keep it in place.

  25. C-Tech Says:

    Inspected a 59 Buick Electra 225 today. You could make 3 Camry ‘ s from all that metal.

  26. HtG Says:

    OK, I’m back

    Do I really need a dealer to make a big giant decision in my life like buying a car? Why, can’t I make an agreement to pay 350 a month for 36 months all on my own? Like the 100 a month for cable tv, or 80 for a smartphone? Do I need a dealer to be the middleman when I get insurance on my car? How about health insurance?

    And if I’ve got cold hard cash for my Porsche, why can’t I order directly, just like I can order a Tesla from that scary computer.

    And why do so many people stop going to the dealer for service once the warranty ends? (actually, I only let the dealer touch my car)

  27. Chuck Grenci Says:

    The 11 million figure (used in the description from the NADA supporter) is being used to augment to the audience, that the dealer, does in fact, have a vested interest in making his business succeed (and provide, to the customer, a positive experience). This, of course, is not always the case, but bear in mind, for the long term, this needs to be ultimately perceived by the customer (that issues will be successfully resolved). We’ve all heard the ‘horror stories’ but those, of course, get the press; quite a few positive outcomes (also occur) when problems have arisen (and get rectified) that don’t get reported.

  28. Bradley Says:

    #27

    Thanks! NADA may also be glossing over terms. By “Dealer” they may mean the parent company of many actual dealerships.

    I avoid this definition of “Dealer.” As I want to support the local business if possible.

    As 11 Million still seems high at least in Iowa. All dealerships are some form of sheet metal building. A few may have a cinder-block wall. ;)

  29. pedro fernandez Says:

    #24 Very good points, C-Tech. Why must they spend so much money on building luxury type dealers when they’re not even selling luxury cars? I remember the local Toyota dealer which had really low prices and ran their business out of a trailer-like facility, then they build this multi-million $ facility and they stopped being the lowest priced Toyota dealer around.

  30. cwolf Says:

    From what I understand, the reason for “holdbacks”(monies given to a dealer to move a particular product) is to move an abundance of inventory so set production schedules do not become bottlenecked. More of this incentive is offered to the customer in regions where this model may be less desired. The purpose of conducting business in this mannor is to not undermine the msrp. Rebates, such as end of year, are targeted to assist in removing dealer inventory.

  31. cwolf Says:

    buying direct may sound great, but how are the vehicles stored on a factory lot before shipping to every part of the country? The logistics, alone, to have a lot of enormous size for all the vehicles would be a nightmare! And how does one test drive a car shown on the net? Without a dealership, where is the car to be serviced and by whom? Dealer mech. are ASI certified. Just as manufactures quit making many needed components,due to higher costs, what would make cars less expensive to the consumer if the manufacturer now has to carry the burdens of being a dealership nation wide? Me thinks its wishful thinking.

  32. HtG Says:

    No one is saying there shouldn’t be dealers. Only, why should dealers be able to exclude direct sales? You want a car right now? In grey, perchance? Go to the dealer. You want to order one? Why not have it made just for you, and arrive in 6 weeks? There’s lots of benefits to dealers, but their manipulation of the political system to protect themselves, that’s the issue. It’s like tariffs; what free market person defends those? I love it when the NADA talks about free markets.

  33. pedro fernandez Says:

    How did Daewoo manage when they first began in the US, they had no dealers, only salesmen who would take an order and have the car delivered to you and serviced at GoodYear, if I’m not mistaken.

  34. cwolf Says:

    #32 HtG: Can you see how ordering direct would favor a low volume car company over larger ones? It would incure a higher cost to them, where the smaller would gain by not having to make the investment(s)to establish a dealer network. The exotics can get away with this because they sell only 5000 or more units, often sold out in advance.

    And, as you stated, only wish to order a car direct to your specifications,do you honestly think the car will arrive any sooner? Ordering from the dealer is no different than calling another company person who has to be hired to take the order. But the company person is at a disadvantage for having to contact the dealer you wish to have the car sent to, not including the added paperwork. Is this a cash sale or is financing involved? Do you really think a large car manufacturer wants to have to deal with this! I think not. They just want to assemble cars.

  35. C-Tech Says:

    @ #30 CWolf, holdback incentives are used by OEM’s for a variety of reasons and the dealer principal may or may not pass this on to the buyer. This money is supposed to be used for advertising at the local level, however no one checks for receipts. Very often holdbacks are used for sales incentives for the sales force and of course straight to the bottom line of dealership profits.

  36. XA351GT Says:

    Wait , okay so warranty work in a dealership doesn’t cost the manufacturers any thing? Is that what he said? I am probably wrong ,but warranty work will still cost the OEM regardless if it’s a dealer or corporate store. Now the only real difference is that the Dealer would fight for it because they get paid. The OEM would have to pay either way. I agree with a earlier post any OEM that refused warranty work would only set them selves up work a butt kicking in the social media outlets. That kind of bad PR would hurt or kill some companies.

    In closing the NADA sticking up for their system , well duh, You never hear a fish market yell get your rotten fish here.

  37. HtG Says:

    But europeans order their car and then wait. I do see though, how an OE would like to get a bunch of orders for grey cars of a particular option package, and then run them down the line. It’s efficient in the paint shop and leads to better quality of assembly. I’m just having a very tough time accepting why dealers should have exclusive rights to retail sales. It may have good points for most buyers, but why must direct sales be prohibited? Let me order a stick Corolla in red.

  38. HtG Says:

    Or look at Mini. They have a million possible combinations. You just do it on the computer, and then wait for your car to be made. I can’t do that from home?

  39. C-Tech Says:

    The most effective use of holdbacks for the consumer, in my opinion, is when it is used to reduce interest rates or lease rates. This creates sales and the incentives flow to the consumer. This also protects the msrp.

  40. cwolf Says:

    Enjoy the stick Corolla in red. It will arrive in 7 weeks at you door. Sorry, but you’ll have to peal off the plastic from the windows,wash or buff off anything that may have leaked from the car above. Be sure to give the new car a thorough inspection before driving the vehicle. Please report any dents, scratches or mechanical defects within ten days at our toll-free number; we will contact you within 48 hours. Thank you Mr. HtG for buying Toyota and hope your shopping experience with us is fulfilled.

  41. C-Tech Says:

    CWolf, OEM’s would LOVE to have the additional profits that go to dealers now. Keep in mind on a 25K vehicle the dealer keeps $1000 to $1500 in profit. Multiple that by 50,000 vehicles.

    Lower volume producers are not favored by direct sales, after all if you need or want to replace a vehicle now, you aren’t going to wait 6 weeks for a Tesla or Mini to be built.

    Why would OEM’s not use ASE certified technicians? Many operations at a dealer service department are NOT performed by an ASE technician (trust me, I’ve been there). Most dealers grudgingly pay for technician training only because the OEM’s won’t pay the warranty claims unless a trained technician does the work (yes there is a system that checks this).

  42. C-Tech Says:

    Deliver that Corolla to the local Goodyear or Firestone and they will take care of that for the same cost (or less) that the OEM’s currently reimburse the dealers.

  43. cwolf Says:

    OEM’s(and I) would love the $1-2K extra profits, but the overhead would cost them more…but wait, they must have a spare closet somewhere.

    Sending the Corolla to Goodyear or the other would be a sound choice….about as good as the place pedro had taken his beauty to get cared for. You know….the one who also peddles Chinese parts.

    Sorry fellers. This topic is so complex, I can’t help myslf but to have some funn’in with it.

  44. C-Tech Says:

    Don’t like Goodyear? Then deliver it to Hertz, there are already a “dealer” in that they take direct delivery of vehicles, make warranty repairs, and do new car prep. By the way, they could probably take HtG’s trade-in too, plus give him a discounted rental while waiting for his car to be built. Ah the possibilities, if we tear these (legal) walls down.

  45. C-Tech Says:

    In the Orlando Sentinel today, The Police solve a murder mystery by determining the victim was killed by a malfunctioning airbag in a 2001 Honda Accord. The airbag went off while she was driving and sprayed metal fragments into the victims neck, causing an accident. Since the metal fragments looked like a stab wound the Police initially thought there was foul play. A few days later the recall notice came to replace the defective airbag. After some research by the detective on the case, he found other drivers injured and killed from these airbags. The cars affected most are in high humidity areas like Florida.

  46. Todd T Says:

    What Musk has done with Tesla is point out that the world has changed. The reasons or necessities for franchising distribution points are not what they once were. When cars were first sold, it was vital to have distribution and service points with great frequency. Up through the 50′s a selling point was the number of service centers available. That cost would have been prohibitive for any manufacturer to absorb. So, franchising was the answer to dot the nation with service points where consumers felt confident and safe with their purchase.

    Today, nationwide coverage can be accomplished with 400-800 points…something no longer prohibitive. But, in the meantime there’s the fact of a legacy system, something private individuals have invested millions in, and have been wise enough to organize and lobby protections for that investment. And isn’t that really the American way?

  47. Todd T Says:

    Interesting discussion on holdback and incentives, they seem to be used here as interchangeable terms.

    Holdbacks, are actually part of the dealer margin (the difference between MSRP and what the dealer pays for the car). This money is the dealer’s money. It is held back, by the manufacturer as a protection for the dealer. This practice came to be, because some dealers would discount too far, and lose money on the car, and then they may not be able to pay for the car that they have sold (go out of trust).

    Incentives, are funds paid to a dealer as a bonus, for meeting certain goals…sales, service, CSI, CPU penetration, local market share…just about anything you can come up with.

    The mysteries of the franchise dealer system are many, the urban myths are even greater… ;-)

  48. HtG Says:

    How come no one mentions the markup the F&I guy makes on extended warranties? What is it, 100%?

    Bottom lines and business models, folks. The dealer uses new car sales to make margins elsewhere. That’s how the 2.5% number may be truthful though not the whole picture at all. We haven’t even looked in the general direction of finance companies trying to win the business of the dealers in the first place. What would be the bargaining chips there? Hmmmm?

    I wish I were full of compressed nitrogen on this

  49. bobek Says:

    If you take the 2 diesel trucks from GM Chevy & GMC you come up with 22% which makes them # 1

  50. bobek Says:

    Duh 11 & 15 equals 26%

  51. C-Tech Says:

    @ #50 Sorry Bobek, your math is faulty. You need to know the total number of Chevy and GMC trucks sold and the total number of Chevy and GMC Diesel trucks sold to determine the overall percentage.

  52. C-Tech Says:

    @ #48 It is not quite 100% but it is close to cocaine profits. The most profitable square footage in the dealership is the fiance office. There are commissions on financing, service contracts (of all kinds), and insurance (of all kinds). Don’t forget accessories (Truck accessories are highly profitable)

  53. C-Tech Says:

    HtG, why we forgot the profit on nitrogen filled tires!

  54. pedro fernandez Says:

    These TPM devices are a rip off to consumers, I was not aware that they have to be replaced after the batteries die, really? once a month I check the tires on my Crapolla and add air with my $15 Walmart tire inflation device. I’m so glad I don’t have one of these modern electronics on wheels machines.

  55. HtG Says:

    Pedro, I’ve talked to a long time service manager around here who detests those things. Every time the temperature drops, he’s got a line of people with their low pressure lights that need to be reset. He really hates those things. (he was Honda, BMW, Nissan)

  56. pedro fernandez Says:

    Reminds me of idiot lights, especially the ones for temp and oil pressure, once they turn on, it’s too late for today’s mostly aluminum engines, I noticed my temp gauge was going up like 3/4 of the way and I stopped immediately and called a tow truck, it was the thermostat but the temp light never went on.

  57. Dave Forslund Says:

    Hi John and Sean,

    I have been a loyal viewer for many years…they go by quickly. I have always enjoyed your shows due to their ability to keep me up-to-date on the auto industry and the pleasant manner in which the news and facts are presented.

    However, this past year or so, I have noticed that John’s reporting has started showing a more opinionated view. He more often than not does state that it his opinion. I can understand the need to support your contributors and sponsers.

    Having an opinion stated is fine. However, I think that all sides of an issue are worthy of reporting. Today’s show had a person representing the dealer’s assn. state the dealers value. Why not have someone from Tesla state their side of “direct” selling of a more carefree/service car? Why is it their preference?

    After reading your “comments” there are many who would consider by-passing the traditional dealer in purchasing a car.

    I have driven Mercedes (I have 2- E Class)for the past 14 years, buying from the same rep each time. On Friday I went to my dealer. The rep has retired to Florida and they introduced me to a young (20 something) ex-Toyota rep who has been at the dealer for only 3 weeks. Nice kid, and I wish him well. But somehow I have the feeling that I am just another walk-in. I can’t relate to someone who has the latest “hair-do” with pants as tight as my wife’s fashion slacks.

    If I am just a number…why not deal direct? At least I will know that I am dealing with the source of the power!

    Or maybe….I’m just getting old (age 77)

  58. Bob Wilson Says:

    Interesting observation about the Jetta diesels. So I took a quick look at the Toyota Avalon:

    1,437 / 4,862 = 30% take rate in September

    Jetta diesels sales, 2,586 in September 2014. In our list of fuel efficient vehicle sales:

    7,986 – Prius hatchback, 100% hybrid take rate
    3,192 – Prius C, 100% hybrid take rate
    2,881 – Leaf, 100% EV take rate
    2,746 – Prius V, 100% hybrid take rate
    2,586 – Jetta Diesel, 25%? take rate

    Congratulations are due to the Jetta for their excellent take rate. Time to break out the Champaign.

    Bob Wilson, Huntsville AL

  59. Gerry P Says:

    All the arguments NADA has for how great the dealership system is I can agree with except for one thing. I have a real problem with a special interest blocking a company from doing business the way they choose to. Is this the American way? I thought the American way was to let a business do it the way they choose to. The American public will decide how they want purchase their car.
    Personally, I would rather buy a Tesla from a dealership. I like going to dealerships and talking with knowledgeable people on the product. However, on a car run on batteries with an electric motor, no engine, transmission, or drivetrain for that matter, you have a much less complex vehicle. There is a lot less that can go wrong. Be careful dealers, you may get what you wish for.

  60. Chuck Grenci Says:

    Well, here’s a definition of laissez-faire (which you are implying in post #59); the problem is, that government had already imposed law(s) that, until TESLA can reverse, should be held accountable. http://www.merriam-webster.com/dictionary/laissez-faire

    Laissez-faire is a ‘double edged sword’; what allowed the barons of the late 19th and early 20th century to prosper, also led to worker treatment untenable to many (which then led to the ‘unions’ of the day). Oh, what a wicked tight rope we walk.