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Michael Kern

Michael Kern

Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com, 

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Dealerships Struggle To Remain Relevant As Automakers Go Direct To Consumer

  • State dealer associations in the US are pushing for changes to franchise laws that govern the relationship between car dealerships and automakers.
  • Tensions are rising between dealerships and automakers over various issues, such as direct negotiation between automakers and end-users.
  • The growing conflict could cause significant problems for the recovering automotive market in the US, which has seen inventories return but consumer demand drop due to high interest rates and rising living costs.

Car dealerships and automakers are butting heads over changes to franchise laws that govern their relationship.

The regulations aim to protect the independence of dealerships, but as sales models and vehicle service work evolve, tensions continue to rise between the two parties. 

Disagreements have arisen over various issues, such as Florida's dealer association calling for an assessment of an automaker's business practices by the Department of Highway Safety and Motor Vehicles.

The situation is not any better in Virginia, where there are demands for legislation that would ban direct negotiation between automakers and end-users. The problem is complicated by the fact that automobile laws vary widely from state to state. As a result, these issues are not black and white.

The growing friction could potentially cause significant problems for the recovering automotive market in the U.S., which has seen inventories return over recent months. 

Despite this positive development, consumer demand has dropped due to high-interest rates and rising living costs. In response, numerous automobile makers and dealerships have had to drop prices to push out inventory. Most notably, Tesla

Unfortunately, there is no easy solution to this problem. If left unchecked, both dealerships and manufacturers could suffer severe consequences. 

This highlights the need for more effective communication channels between parties involved in order to find common ground on critical issues affecting them both. It will take proactive efforts from all sides if they hope to overcome these challenges facing the industry today.

By Michael Kern for Oilprice.com 

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