Ask a car salesman anything...anything at all (Vol. 2).

[Butter Face]

Si1295 said:

Butter Face said:

Mostly single digit % for the dealer.

Seems like a lot of effort, jumping when the manufacturer asks etc.. for not much return. I'm guessing after sales accounts for a large part of income

As covered before the % profit on individual units it’s peanuts and lots of deals make not a lot and some make an upfront loss. But the individual numbers and % don’t really matter, it’s the overall volume that really matters. Used cars are different as once you’ve sold it; that’s it, nothing else.

As a completely made up example, say a dealer has a target of 200 cars in a quarter (new registrations not orders) and hits that, they could get say £60k from the manufacturer. So really you could stand to lose £250 on every car sold and still make money. Some dealers do gamble with this and that’s where Carwow etc get their prices, dealers who will give away every penny to people to take a deal possibly from out of their normal area etc at a loss.

Most dealers will either hit their number organically or will just miss.

[Fast Bug]

As Butters says, I did a deal in December for 101 vans that "lost" £200k. But that kicked in nearly £700k of bonus money.

The manufacturers dangle massive carrots knowing some numpty will do silly deals for then.

[stevemcs]

Do you think if manufacturers moved away from number of cars registered and towards overall profit it would help the industry ? Selling 10 cars and making £100 profit always seems like hard work compared to one car and making £1000.

[Wills2]

stevemcs said:

Do you think if manufacturers moved away from number of cars registered and towards overall profit it would help the industry ? Selling 10 cars and making £100 profit always seems like hard work compared to one car and making £1000.

It just doesn't work to say I'll build 90% less and charge more, for a start the costs per unit would be eye watering, loss of scale with suppliers would murder the price of components to the point no one would be bothered to deal with you leading to exponential cost increases and a finished product priced way outside of the market, a total non starter.

Scale is key in mass car production (and for the supply chain) just look at Tesla and their long fight to gain the volume that then makes the model work profitably it's all about pushing the units out of the door to clear your fixed costs and start to then return profit.

Tesla couldn't suddenly decide to sell 90% less and somehow charge a per unit price that increases profit 10X.

Edited by Wills2 on Sunday 31st May 08:54

[Wooda80]

stevemcs said:

Do you think if manufacturers moved away from number of cars registered and towards overall profit it would help the industry ? Selling 10 cars and making £100 profit always seems like hard work compared to one car and making £1000.

But if you only sell 1 car instead of 10 then that isnt going to keep the production lines open next month.

And that's the reason that almost every manufacturer in almost every country in the world chooses to operate the franchised dealer model that some people on here have such an irrational hatred of.

It provides a 3rd party to pay for and hold any excess stock so that the manufacturer has the cash flow to do the R&D, buy the materials and infrastructure and pay the wages to design and build next moths production.

It's a relationship of mutual trust and cooperation so if at any point the amount of stock being forced on the dealer network starts to look untenable then the manufacturer shares some of its profit with the dealer as a bonus to help shift the unsold stock.

If you had the money and the bravery to say 'Thats it - we're now only building to order' then you would have a much smaller business overnight, unit cost of production would go sky high and so would retail prices. Hard to see who would benefit.

ETA - What Wills2 said!

[jamoor]

Wooda80 said:

stevemcs said:

Do you think if manufacturers moved away from number of cars registered and towards overall profit it would help the industry ? Selling 10 cars and making £100 profit always seems like hard work compared to one car and making £1000.

But if you only sell 1 car instead of 10 then that isnt going to keep the production lines open next month.

And that's the reason that almost every manufacturer in almost every country in the world chooses to operate the franchised dealer model that some people on here have such an irrational hatred of.

It provides a 3rd party to pay for and hold any excess stock so that the manufacturer has the cash flow to do the R&D, buy the materials and infrastructure and pay the wages to design and build next moths production.

It's a relationship of mutual trust and cooperation so if at any point the amount of stock being forced on the dealer network starts to look untenable then the manufacturer shares some of its profit with the dealer as a bonus to help shift the unsold stock.

If you had the money and the bravery to say 'Thats it - we're now only building to order' then you would have a much smaller business overnight, unit cost of production would go sky high and so would retail prices. Hard to see who would benefit.

ETA - What Wills2 said!

The big mistake you are making in understanding why the Dealership model won't work in the future is the difference between business models of Tesla and everyone else.

If mercedes shut its plants for a month and produced and sold no cars it would recieve pretty much no income. Mercedes make money by selling cars as consumables with a 15 year lifespan then they hopefully sell another. This keeps their business running and they hope to continue to sell cars and make money.

The tesla business model turns the actual cars into money making opportunities, one of their aims was to fully automate the manufacturing process as much as possible so you can just reduce output if needed and it wont make a difference to labour costs.
The more important one is to turn the cars into units that continue to make money once the leave the door with software features, hardware upgrades (you can upgrade the Model S screen to something more modern) but most importantly into a self driving taxi, with Tesla taking a commission on every ride.

This way if they aren't selling cars they are still making money. This way there is less pressure to get units out the door and money back to the Manufacturer as they get it via services, its just like the iphone, they will sell you an iphone for £1,000 and then get you to sign up to icloud, buy a bunch of apps through which they get 30% comission on the sale and you download music from apple music.

Couple that with the cars allegedly lasting 500k+ and dealerships relying on servicing to make money, it really is the death knell for the franchised model If it all works out.

[Wooda80]

Almost every car factory in the world has been shut for a few months recently. Almost every one of them has absorbed the change in circumstances , making changes and cuts where necessary.

There was one guy who owns a car factory in California, screaming and threatening all sorts because he wasn't allowed to produce cars that month. It seems that making, selling and delivering new product really is that fundamental to their business.

The ability to sell upgrades to your car is genuinely impressive. I'm see no reason why other manufacturers won't add that as an additional profit stream. I am curious to know how much a typical Tesla owner is expected to spend on software upgrades over say 5 years. How does that compare to the profit on a brand new car? How does it compare with how much a typical Landrover owner spends on deployable sidesteps, mudflaps, seatcovers, storage packs etc?.

Tesla's factories appear to be running at full pelt building cars which the market strongly desires. If their business model doesn't require repeat purchases of hardware because they are so durable, reliable and upgradable then what happens to that production capacity once the initial pent up demand is fulfilled?

[jamoor]

Wooda80 said:

Almost every car factory in the world has been shut for a few months recently. Almost every one of them has absorbed the change, making changes and cuts where necessary.

There was one guy who owns a car factory in California, screaming and threatening all sorts because he wasn't allowed to produce cars that month. It seems that making, selling and delivering new product really is that fundamental to their business.

Tesla's factories appear to be running at full pelt building cars which the market strongly desires. If their business model doesn't require repeat purchases of hardware because they are so durable, reliable and upgradable then what happens to that production capacity once the initial pent up demand is fulfilled?

Haven't you noticed that the services aspect of their business isn't up and running or even close to?

At the moment they have to get cars out of the door and into peoples hands to generate big data about their autopilot to improve the offering and give them a competitive edge (afaik no other company uses big data in that manner to improve their autonomous capabilities)

At the moment they are producing cars to fulfil other markets such as 4x4 Trucks and HGVs, I guess when every single category of car including hyper cars has a competitor then I strongly suspect that they will launch "all new" models. As it stands they are still selling an 8 year old model s and appear to have no plans right now to change.

A Land Rover AFAIK has no recurring revenue stream (except perhaps an extended warranty which they only offer for a few years). You're missing the recurring revenue, its not the software upgrades that are the recurring revenue its the robotaxi which is key here.

[BJWoods]

OK.. where can I make a bet, that this will never happen.. (as never - means we'd have to wait forever to pay out - next 15 years..)

ref - "The more important one is to turn the cars into units that continue to make money once the leave the door with software features, hardware upgrades (you can upgrade the Model S screen to something more modern) but most importantly into a self driving taxi, with Tesla taking a commission on every ride."

[Fast Bug]

I'll be honest, I wouldn't want a car that I've spent a load of my cash being a robot taxi. I'm sure that governments around the world will start taxing you on that income as well, which makes it even less desirable to me.

[Butter Face]

jamoor said:

Haven't you noticed that the services aspect of their business isn't up and running or even close to?

its the robotaxi which is key here.

I thought you said EV’s don’t need servicing? What have Tesla got to offer in the service side of their business if that’s the case?

And as for robotaxis. Never. Gonna. Happen.

[jamoor]

Butter Face said:

jamoor said:

Haven't you noticed that the services aspect of their business isn't up and running or even close to?

its the robotaxi which is key here.

I thought you said EV’s don’t need servicing? What have Tesla got to offer in the service side of their business if that’s the case?

And as for robotaxis. Never. Gonna. Happen.

Services means software services (its quite funny that you think services means servicing a car).

Their business model appears to depend on robotaxis and yes I also agree it sounds far fetched and ridiculous at this point in time but so did their model s being one of the the if not the fastest accelerating car of all time a few years ago. The cybertruck looks ridiculous too but it seems to be a reality.

[jamoor]

Fast Bug said:

I'll be honest, I wouldn't want a car that I've spent a load of my cash being a robot taxi. I'm sure that governments around the world will start taxing you on that income as well, which makes it even less desirable to me.

Governments already tax you on income.
But yeah if a robotaxi could make you £50 a day while you're at work I'd take them up on the deal, especially as there is a camera above the rear view mirror watching the occupants.

[jamoor]

BJWoods said:

OK.. where can I make a bet, that this will never happen.. (as never - means we'd have to wait forever to pay out - next 15 years..)

ref - "The more important one is to turn the cars into units that continue to make money once the leave the door with software features, hardware upgrades (you can upgrade the Model S screen to something more modern) but most importantly into a self driving taxi, with Tesla taking a commission on every ride."

It's one of those things, the more cars that have it the better it gets which means more people have it and then the better it gets.

[Fast Bug]

jamoor said:

Fast Bug said:

I'll be honest, I wouldn't want a car that I've spent a load of my cash being a robot taxi. I'm sure that governments around the world will start taxing you on that income as well, which makes it even less desirable to me.

Governments already tax you on income.
But yeah if a robotaxi could make you £50 a day while you're at work I'd take them up on the deal, especially as there is a camera above the rear view mirror watching the occupants.

You'll need to clear more than £50 a day to cover the extra wear on the vehicle, kick in the plums on residuals, insurance, charging, PCO test and the list goes on. Not to mention if someone chunders in your pride and joy whilst your having a death by power point meeting.

[jamoor]

Fast Bug said:

jamoor said:

Fast Bug said:

I'll be honest, I wouldn't want a car that I've spent a load of my cash being a robot taxi. I'm sure that governments around the world will start taxing you on that income as well, which makes it even less desirable to me.

Governments already tax you on income.
But yeah if a robotaxi could make you £50 a day while you're at work I'd take them up on the deal, especially as there is a camera above the rear view mirror watching the occupants.

You'll need to clear more than £50 a day to cover the extra wear on the vehicle, kick in the plums on residuals, insurance, charging, PCO test and the list goes on. Not to mention if someone chunders in your pride and joy whilst your having a death by power point meeting.

£50 a day, is what? £18k a year?

I don't care about residuals as the car costs £36k. Let's say the car does 100 miles a day that's only £2k in electricity at todays prices over the course of a year. Wear isn't as much of an issue as an ICE car either. It would take alot of driving to clear £50 a day in a Skoda Octavia - fuel alone will be £15 a day to do 100 miles, increased servicing, brakes etc. Not to mention labour costs.

Why would you need a PCO test if you aren't even in the car?

[Wooda80]

Actually I think jamoor might be onto something here.

Tesla have been trading now for well over 10 years. It could be that not one single existing car maker has bothered to look at their business model and take notice. Maybe jamoor should offer his services as a consultant / advisor / aide.

Or maybe they have all looked at Tesla's model and taken what they believe to be the appropriate action. Appropriate based on despite having a product that has for a long time, been well received in the market, selling for a premium price, and until recently without any serious competition, Tesla has failed to ever turn a profit and relies on continual bailouts from its shareholders.

I can see why they would want to copy that, yes.

[jamoor]

Wooda80 said:

Actually I think jamoor might be onto something here.

Tesla have been trading now for well over 10 years. It could be that not one single existing car maker has bothered to look at their business model and take notice. Maybe jamoor should offer his services as a consultant / advisor / aide.

Or maybe they have all looked at Tesla's model and taken what they believe to be the appropriate action. Appropriate based on despite having a product that has for a long time, been well received in the market, selling for a premium price, and until recently without any serious competition, Tesla has failed to ever turn a profit and relies on continual bailouts from its shareholders.

I can see why they would want to copy that, yes.

I don't even know what other car makers have got to do with anything

[Wooda80]

QED

[Fast Bug]

jamoor said:

£50 a day, is what? £18k a year?

I don't care about residuals as the car costs £36k. Let's say the car does 100 miles a day that's only £2k in electricity at todays prices over the course of a year. Wear isn't as much of an issue as an ICE car either. It would take alot of driving to clear £50 a day in a Skoda Octavia - fuel alone will be £15 a day to do 100 miles, increased servicing, brakes etc. Not to mention labour costs.

Why would you need a PCO test if you aren't even in the car?

PCO test is for the vehicle regardless of who drives it. Using your figure of £18k, you'll lose a big chunk of that for insurance and tax and regardless, I've still no desire to get additional money from my car being used as a taxi.