Why Traditional Car Dealerships Are Becoming Obsolete

Let's make something perfectly clear - car dealerships are not going away anytime soon. They most likely will even be around during the next decade. However, car dealerships are becoming increasingly obsolete, as various market disruptors are threatening their basic business model, thanks to the internet and cutting out the middle man. The main company leading the way to eventually making traditional car dealerships obsolete is Tesla.

What Tesla is Doing.

Tesla Motors is perhaps the main market disruptor through the way in which it sells its vehicles through its non-franchise model. Instead of using car dealerships or other third party sellers, Tesla sells its vehicles directly to consumers through their website and their own Tesla stores and dealerships.

More specifically, Tesla has been doing away with the idea of having traditional car dealerships with large parking lots full of cars and various complicated sales processes, including haggling and negotiating. Its stores and car dealerships don't have any vehicles in a parking lot, with many of its stores being located inside malls. Instead, they contain only a couple or even just one of its cars as a show model, plus information about the company. This emphasis on indoor showrooms and a buying process that is extremely simple and straightforward is refreshing to many. Customers who place a deposit down for a Tesla vehicle will eventually have it delivered to a location of their choosing in the future.

The Auto Industry is Fighting Back.

The segment of the auto industry that continues to rely on the traditional car dealership model is fighting back, not only against Tesla, but also against other online websites that have created virtual car dealerships. TrueCar, for example, faced many challenges when they encountered resistance from traditional dealerships, which resulted in many of their dealers deciding to no longer do business with them.

There have also been rumors that Tesla might face the scorn of regulators in certain states, thanks to lobbyist efforts, with the intention being to ban the sale of Teslas in that particular state.

Customers Don't Tend to Enjoy a Dealership Experience.

This is a make or break point for traditional car dealerships. Many consumers don't tend to particularly enjoy shopping for a car at a traditional car dealership. It's an experience riddled with pushy and oftentimes "shady" salespersons, who rely on commissions for the bulk of their income, not to mention complicated deals and offers.

The model that Tesla is offering is far more streamlined and, as a result is a far less complicated and more enjoyable shopping experience for most. Even those in the market for a used vehicle now have more options online, such as through Beepi.com. Consumers can enter the details of the type of car they're looking for, and they'll be presented with various options.

If traditional car dealerships don't make some changes to their basic business model, they risk going away completely. It's up to them to take advantage of the new technologies available to them and to fully integrate themselves into the 21st century.